Milk commodity volatility an unwelcome companion for dairy farmers

Swinging world milk prices show no signs of slowing.

Swinging world milk prices show no signs of slowing.

Dairy farmers aren't lifting their hopes for marketplace volatility leaving them any time soon.

Swinging commodity prices are expected to continue with few in the diary industry holding out hope for change in the near future.

Federated Farmers Dairy chairman Andrew Hoggard said volatility was likely to be a "constant companion" for dairy farmers in the foreseeable future, and that had to be factored into their farm budgets.

Andrew Hoggard fears milk price volatility will be around for while yet.

Andrew Hoggard fears milk price volatility will be around for while yet.

"We need to assume risk is there and make sure our businesses are resilient for it," he told federation members at its national board meeting in Wellington on Tuesday.


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Milk price and trade closely linked

Raising some optimism was that global prices seemed to have improved after at least two lean payout years.

Hoggard said prices were at a stage where farmers could start to get confident of a "reasonable" milk price being delivered this season.

However, there was little to show that any great change in global demand would suggest steady prices in the long term, he said.

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"To be blunt, it feels like the world is even more of an unstable environment to be trading in now than it was this time last year. That instability could go either way. If the great wall of [US President Donald] Trump is built, will it mean increased dairy trade opportunities to the south of it for us, and decreased competition from north of it, because all the people that do the actual milking got deported?"

In Europe, Dutch farmers may be forced to reduce their herd numbers to meet phosphate limits if politicians don't cave in on that front.

"Will the Trump/Putin bromance mean the Russian dairy market opens up again, or will it remain closed?," asked Hoggard.

He felt more confident about competition from plant-based or lab-grown alternatives to dairy.

Hoggard said  there would always be a demand for naturally produced foods if most of the world demand shifted to lab-produced foodstuffs.

"But this will be a select market and the consumers will likely have high expectations In my view our response as farmers to artificial food isn't to join the laboratory race but to instead ensure that we have the best providence story we can provide to consumers. That means the bar will be continued to be raised in the areas of environment, animal welfare and workers."

He said dairy farmers were tackling water quality issues head-on, despite claims by critics.

"[But] what we are concerned about environment-wise isn't necessarily what the rest of the world is so concerned about. Overseas, more emphasis is placed on climate change and biodiversity. While we currently have a great story to tell around carbon-efficient food production here does any of us actually know how any changes to our systems might affect that claim? There is the potential that we could lose that world-leading position without realising it."

Hoggard said New Zealand's animal welfare regulations were among the world's best.

"However as competition gets tougher, when we trumpet our free range, pasture-fed status, expect to get questions around shade and shelter. Antimicrobial resistance and proper use of antibiotics is another concern gaining traction. Again, we are among the best for low antibiotic use, however our customers won't want to know just what the averages are, they will want to see best practice on all farms they purchase from."

He said it was critically important that antibiotics were only used when first-line treatments were not sufficient and it was unlikely that every person on a dairy farm had received enough training about treatment options.

That was likely to soon change, he said.

 - Stuff

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