Getting to grips with the changing composition of dairy demand

The massive spike in dairy prices during the 2013/14 season has simultaneously highlighted both the seemingly insatiable Chinese appetite for dairy products and a fundamental flaw in Fonterra’s milk price formula.  This article expands these issues by looking at factors that will support Chinese dairy demand over the coming five years, as well as considering the likely supply response from other key dairy-producing nations.

Why is Fonterra losing grip of market share in the dairy industry?

Fonterra’s share of the New Zealand dairy market has fallensubstantially over recent years, driven down by a rapidly expanding competitivefringe of smaller export-orientated dairy firms.  This article examines how theindustrial structure of the New Zealand dairy industry has evolved over thepast decade and identifies reasons why changes have occurred.

Is dairy farm debt a significant financial stability risk?

The Reserve Bank sounded a warning shot to the dairy sectorlast week in its latest Financial Stability Report, with Deputy Governor GrantSpencer saying that high farm debt levels pose risks to financial stability.  Althoughthe Bank was merely identifying a financial stability risk, some commentators haveerroneously interpreted the warning as implying that LVR restrictions for dairyfarmers are just around the corner.

The plight of the cow

When we talk about the dairy industry in New Zealand, we tend to focus on how farmers are going, however, we rarely stop to think about the plight of the cows they milk. Over the past decade, these dairy cows have become increasingly indebted and the number of other cows they are forced to share paddocks with has also increased. This article examines how dairy cows have responded to these conditions, and if their underlying financial positions compensate them for all of their hard work.

Milking the golden cow

With dairy prices rising another 7.2% in Fonterra’s latest online auction, consumers are likely to face further increases in the price of milk and cheese at the supermarket this year. Inevitably there have been fresh calls for the Government to step in and help lower the price of milk. After all, New Zealand is responsible for more than a third of the world’s export dairy trade. If petrol costs just forty cents a litre in oil rich Saudi Arabia, why are we paying so much for our milk?

Should farm owners look and sound like New Zealanders?

Does allowing foreigners to purchase farmland endanger the things we hold dear? Overseas investors cannot ship land back to their home countries. Their use of farmland needs to comply with all New Zealand’s laws and regulations, including the Resource Management Act and city and regional council land use regulations. There is no evidence that shows foreign farm-owners are any more or less reasonable than their Kiwi counterparts with regard to allowing through-access to public land and waterways, looking after the environment, or ensuring their farms are sustainable.