19 Aug 2015

Dairy industry will ride out storm - Rabobank

7:58 am on 19 August 2015

The New Zealand dairy industry will ride out the storm generated by the collapse in dairy prices but it's going to take until the middle of next year, Rabobank says.

The agri banking specialist said in its latest review of the dairy sector that GlobalDairyTrade auction prices in July and early August were "truly awful" for New Zealand dairy farmers.

Prices at today's auction rose an average 14.8 percent - the first rise in the dairy price index since March.

Report co-author, Rabobank senior dairy analyst Michael Harvey, said the poor run until today did not change the long term outlook for dairying.

"It's such a dire market environment right now and it's probably a lot worst than even we were thinking it could get. We knew it was going to be a slow recovery but it really has tanked," he said.

"But the Rabobank view is that the mechanics to turn the market around have been triggered. Farmgate prices are falling for all producers around the world, retail prices are falling at the consumer end to try and stimulate demand and supply growth is starting to slow globally, so they'll be the factors that will drive a recovery.

"But the sad reality for the next 12 months at least is, it's going to be a few months away before we start to see to see a recovery and we have obviously still got a very weak pricing environment in the global market which obviously flows through to a very weak pricing environment for New Zealand farmers short term."

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