Recession's bite a deep one

There's pessimism over the future of dairying.

Red Sky managing director David Beca said the world recession is likely to have an impact on lowering prices and further demand for global dairy products, which in turn will mean a lower payout for dairy farmers.

Red Sky is a company providing software, which enables farmers to analyse their business.

Mr Beca, who is based in Victoria, Australia, said he was pretty pessimistic about the future of dairying.

"I am concerned in that we are not just seeing a significant softening of commodity prices, but the climate of recession in the major western countries, will affect us as well."

The two were not a good cocktail, he added.

"We need to really make use of what will still be a pretty good year.

"It is disappointing the payout is coming down, but it will still be a very good year," Mr Beca said.

Fonterra announced it was dropping its 2008/09 payout forecast by 60c to $6 a kilogram of milk solids.

The reduction follows a 24 per cent drop in international dairy commodity prices in the past eight weeks.

Depending on what happens to international dairy prices, the currency and SanLu's liabilities, the payout may fall further this year.

"We're having the same warnings that the payout in Australia will fall.

"Our predictions are for a 10 per cent drop across the Tasman."

Mr Beca doesn't believe the impact will be a quick shock and the biggest concern may come the year after, with people having less disposable income.

- © Fairfax NZ News