$21m hit to Nelson economy

The Nelson region economy will take a $21 million hit from an expected milk price drop.

Fonterra's forecast milk price reduction from $7 per kilogram of milksolids to $6 per kg means dairy farmers' expected incomes will be cut. Dairy prices have slumped about 40 per cent on the GlobalDairy Trade index from a peak in February. Fonterra has now slashed its forecast farm gate milk price. Last season it was $8.40 per kg, and now it has revised its forecast price for the coming season from $7 to $6.

The Nelson Tasman region has 153 dairy herds producing an estimated 20.93 million kg of milksolids. With growth likely in the coming season it would result in lost income of more than $21m, said DairyNZ economist Angie Fisher.

Farmers are being warned to revise their budget and have contingency plans in place for a possible dry summer. "And with large tax bills looking from last year's record season, farmers should also contact their accountant to re-calculate their tax," said DairyNZ chief executive Tim Mackie. It's not just farmers who will be affected but also the wider regional economy.

Nelson Regional Economic Development Agency chief executive Bill Findlater said: "It's tough for those dependent on that industry and of course $21m out of the economy does have an effect."

However, he said the milk price was dropping from a high point.

"Milk has had some pretty amazing payouts for some time so perhaps it's a correction. I don't think it's doom and gloom."

Nelson Tasman was not as dependent on milk as some regions and the $21m loss was out of the region's $3.2 billion GDP.

Other primary industry export earners for the region include pipfruit, kiwifruit, forestry, fishing, sheep and beef. Findlater described pipfruit as holding its own, and like kiwifruit was still in its export selling season so returns were not finalised, while timber prices were down.

He said the region's economy was in a settling down period.

The Nelson Mail