21 Jul 2015

Dairy prices low for 'a little bit longer'

11:51 am on 21 July 2015

The Finance Minister Bill English is confident dairy prices will recover but is just not sure when.

Bill English during caucus run 23/06/2015

Bill English Photo: RNZ / Alexander Robertson

Bill English said most dairy farmers would survive the slump in prices because of the benefits received when dairy prices were high.

Mr English, who was in China last week, said there was a general view that dairy prices would not remain as low as they are.

"Everyone believes they're too low for the health of the dairy industry, whether they it's here or in China or in Europe, but it is going to take some time for those prices to pick up."

Mr English said he could not say when prices would go back up.

Prime Minister John Key is talking up the possibility of dairy prices turning around and said New Zealand must not give in to a gloomy mindset. He said he was heartened by the briefing he received from his Finance Minister.

Mr Key said the high level of supply of milk around the world, one of the factors keeping prices low in New Zealand, would not last forever.

"There's been quite a big build-up in inventory. I think when prices dropped the Chinese came in and brought quite a bit and got a little bit ahead of themselves there ... so just generally there has been quite a lot of supply there, but it's a temporary issue."

Dairy prices are now the lowest they have been for six years. Mr Key said he did not know when prices would pick up but it would be "a little bit longer".

Federated Farmers dairy chairperson Andrew Hoggard agreed things would come right, eventually, but said you would need a "really good crystal ball" to work out when that might be.

"There's been a whole range of perfect storm of issues in the last year that have caused the current situation and those factors will dilute I guess and return to normal ... the question for most farmers is how long is it going to take?"

Mr Hoggard said farmers were culling more of their cows than in previous years.

"You can only attribute that to people looking through their herds with a fine tooth comb, and going, 'Right: who, at a low payout, is actually going to cost me money and not make me money?'

Grant Robertson

Grant Robertson Photo: RNZ / Diego Opatowski

"At the same time, we've got pretty record high prices for culled cows. If they are a problematic cow, it makes more sense to turn them into a Big Mac than it does to try and milk them."

Labour finance spokesperson Grant Robertson said it was time the Prime Minister stopped taking a Pollyanna approach and got real with farmers.

"Farmers want people who will be upfront and straight with them and tell them how it is, and I think it's time the Prime Minister did that rather than trying to employ political spin to get himself through this situation."

The Government needed to develop an economy that was not so dependent on riding the wave of commodity prices, he said.