Optimism Emerges for Dairy Industry Amidst Challenging Agricultural Downturn
Source: The DairyNews
Christchurch-based farm accountant and consultant, Pita Alexander, suggests that the dairy industry is showing signs of improvement as the rural sector grapples with a severe downturn. With 60 years of experience in the field, Alexander acknowledges that the present downturn is the most challenging he has witnessed, particularly impacting the sheep sector.
Despite the dire circumstances for sheep farmers, Alexander identifies positive indicators for the dairy sector. Notably, he points to recent increases in the Global Dairy Trade (GDT) and optimistic predictions for the farmgate milk price. However, he underscores the need for a farmgate milk price of $9/kgMS for dairy farmers to truly overcome the challenges they face.
While acknowledging that dairy farmers, especially the younger generation, may not have experienced a downturn of this magnitude before, Alexander emphasizes the resilience of farmers. Despite carrying four times more debt than their sheep and beef counterparts, dairy farmers have handled the situation relatively well, perhaps due to the downturn lasting only one year.
One significant challenge for New Zealand, according to Alexander, is the flat state of the Chinese market, which constitutes 35% of dairy exports. Other major markets, such as Australia, the USA, and Indonesia, account for just 5% each. Alexander cautions against blaming China, highlighting its internal economic challenges and the concurrent rise in domestic dairy production.
While the dairy industry shows signs of improvement, Alexander advises caution and prudence in spending. He recommends farmers seek guidance from top-class farm advisors to make informed decisions during this challenging period. Additionally, he notes that even with the upturn, it's crucial for farmers to refrain from making principal payments on bank loans or providing financial assistance to family members during a downcycle.
While acknowledging that dairy farmers, especially the younger generation, may not have experienced a downturn of this magnitude before, Alexander emphasizes the resilience of farmers. Despite carrying four times more debt than their sheep and beef counterparts, dairy farmers have handled the situation relatively well, perhaps due to the downturn lasting only one year.
One significant challenge for New Zealand, according to Alexander, is the flat state of the Chinese market, which constitutes 35% of dairy exports. Other major markets, such as Australia, the USA, and Indonesia, account for just 5% each. Alexander cautions against blaming China, highlighting its internal economic challenges and the concurrent rise in domestic dairy production.
While the dairy industry shows signs of improvement, Alexander advises caution and prudence in spending. He recommends farmers seek guidance from top-class farm advisors to make informed decisions during this challenging period. Additionally, he notes that even with the upturn, it's crucial for farmers to refrain from making principal payments on bank loans or providing financial assistance to family members during a downcycle.
