New Zealand in Mourning as #Fonterra Slashes Payout, Fall of 2.7% GDP

International Students "Only Seen As Cash Cows"

New Zealand’s dairy based economy could be in trouble

The dangers of living in an economy too dependent on agriculture hit home today in New Zealand.

Dairy farmers are facing a “disastrous” year after a prediction that none will make money from Fonterra’s payout forecast, issued today.

According to an article in today’s NZFarmer.co.nz:

Fonterra today cut its farm gate milk price forecast for the 2014/15 season from $5.30 per kilo of milk solids to $4.70/kg amid ongoing global milk powder price weakness.

The New Zealand dollar fell half a cent against the greenback, from US77.1c to US76.6c, after the announcement.

The forecast is well down from last season’s milk price of $8.40/kg and would equate to a cut in dairy farmer incomes of around $6.8 billion according to Dairy NZ figures. A forecast dividend increase from 10c per share last season to between 25c and 35c will be of little solace to farmers.

Dairy prices have continued to fall since the last quarterly payout forecast was announced in September, with whole milk powder falling nearly 17 per cent while skim milk powder was down 8 per cent…

According to John Kuyf, the managing director of REL group, the financial and emotional impact of Fonterra’s forecast is “quite severe” Most of his friends need $5.30 just to keep their heads above water, he said

“We’re an agriculture-based country. And it’s just a bugger.”

The NZ Herald wrote:

Westpac said the drop from season’s record $8.40 farmgate milk price to $4.70 was equivalent to a reduction in income of $6.1 billion for the New Zealand dairy industry, or 2.7 per cent of the nation’s gross domestic product…

Large scale job loses are predicted as farmers start laying off workers.

So, is this the beginning of the end for the “rockstar economy” ?

It does look like it. New Zealand has failed to build up any other significant sectors of its economy. It’s tourism and international student markets generate a fraction of the income of its dairy sector.

Looking on the bright side, a decline in dairy farming will have positive impacts on New Zealand’s environment and a significant decline in the use of fertilizers. Runoff from farms has rendered many of the country’s water bodies too polluted to swim in.

We must get real about cleaning up our rivers and lakes, because the world is beginning to realise that we aren’t living up to our clean green image.

quote from Dr Russell Norman, leader NZ Green Party.

There is also likely to be a drop in property values as confidence goes out of the economy and unemployment rises. Investors will seek out other rockstars to follow.

Read more about New Zealand’s green credentials here: Green credentials or greenwash?

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4 thoughts on “New Zealand in Mourning as #Fonterra Slashes Payout, Fall of 2.7% GDP

  1. Remember to repeat that famous NZ mantra, while reading this article:
    “New Zealand is NOT a capitalist country. We care for our people. Not like the money-grubbing foreigners”
    http://www.stuff.co.nz/business/farming/agribusiness/73514324/sell-to-us-cheaper-and-wait-longer-for-payment-demands-fonterra
    Sell to us cheaper and wait longer for payment, demands Fonterra
    ANDREA FOX
    Last updated 09:51, November 2 2015
    Some business that sell to Fonterra have been asked charge less.

    Fonterra is sharing its belt-tightening pain around, telling some businesses that sell it products and services it expects a 10 per cent reduction in their prices and that they will have to wait longer for payment.

    The move follows the dairy company cutting more than 700 jobs in recent months.

    READ MORE: Fonterra confirms more jobs to go

    A statement in response to a NZ Farmer inquiry said that in similar manner to its own internal process to improve efficiency, Fonterra was asking its vendors “to also look at their own business for efficiencies which would lead to an improvement in their pricing, as well as bringing them in line with our standard payment terms”.

    Well, that doesn’t sound capitalist in the least .. more like a command economy …

    Like

      • Yup. The outcomes of those commands … will be interesting towards the population, as they then have people forcibly passed or gaining qualifications “for the good of the nation”, not through proper procedure and assessment.
        As an example, there is an initiative between some universities … to churn out technical professionals in 6 weeks, as opposed to the regular 3 years (and all in the span of regular office hours).
        Of course, they could just hire the qualified migrants – even the international students that began and graduated in New Zealand in those subjects … but I guess that’s another WWINZ (as carpentaro says “Wouldn’t Work In New Zealand) proposal.

        Like

  2. Reblogged this on Talking Auckland and commented:
    Well that is a triple ouch for our Finance Minister as we go into Christmas.

    Looking at stats for Auckland I notice our heavy industry complexes are doing well and continuing to expand especially in metals and heavier manufacturing.

    Whether that would be enough to insulate at least Auckland’s economy from the dairy collapse is yet to be seen

    Like

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