Friday, March 29, 2024

Positives in low milk prices

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Lincoln University agribusiness and food marketing programme director Nic Lees believes there are positives in the low milk prices.
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Low dairy prices would benefit the dairy industry in the long term because they were the best thing that could happen to limit European expansion.

“A cost war is going on between NZ and Europe at the moment.

“Quotas have come off production in Europe so they are expanding production. 

“This is similar to what is happening in oil with expanding production due to shale gas,” Lees said. 

“Ireland, for example, is planning to increase milk production by 50%.

“NZ is the Saudi Arabia of milk. 

“We can be the lowest cost producer but need to focus on grass-based production to weather the storm,” Lees said.

“Grass will always be the lowest-cost source of feed and NZ has the most efficient grass-based dairy system in the world.”

While Ireland could grow grass too, it used less than half of what it grew.

The large, housed dairy operations in Europe were also profitable only at high milk prices, Lees said.

A cost war is going on between NZ and Europe at the moment.

Nic Lees

Lincoln University

“We need to focus on what we are good at, which is grass. The halcyon days may be gone for a while though.”

High prices were unlikely again soon.

It was going to be a slow recovery of price and dairy farmers had to be profitable at $5/kg MS or they wouldn’t survive.

The average milk price over the past 10 years was about $5.50/kg MS. 

Lees predicted that to be similar over the next decade but with greater volatility.

“This is going to continue so farmers need to have systems that are still profitable when the price is low. 

“The most resilient system is the low input grass-based system,” he said.

As an economy NZ should also recognise opportunities in other areas. 

Beef was a great story with China needing to increase its beef imports by up to 20% a year for the next five years to meet its surging demand for protein.

Lamb also had good prospects with opportunities such as growing the sheep dairy industry, Lees said.

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