The New Zealand dollar consolidated overnight after falling below 65 United States cents for the first time in six years yesterday as a slump in dairy prices and benign inflation stoked expectations of increased interest rate cuts.
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Writing before the auction today, Tobin Gorey of the Commonwealth Bank of Australia warned that “the sharp falls in whole milk powder futures prices point to another sharp fall (10% plus) in powder auction prices”.
Skim milk powder fell 10.1 per cent and anhydrous milk fat fell 10.6 per cent. Subsequently, New Zealand could very well be on the cusp of significant structural changes as capital moves into non-dairy aligned sectors. It’s under review.
Fonterra has forecast a farmgate milk price of $5.25 a kg of milksolids for the current season and has said it will look at the forecast again when the board meets on August 7. Was $4.50.
New Zealand’s dairy exports to China have tumbled 69 per cent since the start of the year compared with 2014, official data shows, whittling Beijing’s share of the country’s total dairy shipments to roughly 16 per cent, from 37 per cent last year.
AgriHQ dairy analyst Susan Kilsby said the dive in prices suggested market participants were taking a much dimmer view towards a price recovery.
She said farm debt levels would rise and rural communities would suffer as producers cut spending.
“To buy new they would be $144,000, so someone’s taken a massive hit – it would be the poor bugger who first bought them”, Levet said.
“Reducing the number of roles in our business isn’t about individual competency; it is about continually improving the way we deliver performance,” Fonterra chief executive Theo Speirings said.
He commented that the news has been unsettling for for the people affected but a change was needed in order for the company to stay competitive in today’s global dairy market.
An AHDB dairy report said more pressure would be on wholesale dairy prices.
The New Zealand-based company said in a statement that the employment cuts were to result in savings of up to NZ$60m ($39m; £25m) per year.
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The partnership increases Fonterra’s ability to access a globally traded whey protein and lactose market that was worth more than NZ $2.7 billion in 2014.
