Dairy Payout Rise Has Implications
NEW ZEALAND - The substantial increase in forecast payout to New Zealand dairy farmers and the perception that world dairy commodity prices are set to remain high in the medium term have significant implications for New Zealand's dairy industry.
31 May 2007
1 minute read
Growth in cow numbers of New Zealand's dairy industry has slowed the past couple of seasons as payouts have failed to compensate for rapid growth in land prices and farm costs (although 100 new farms did begin supplying Fonterra for the 2006/07 season).
The forecast strong payout for the 2007/08 season, combined with a good payout for the 2006/07 season, is likely to reinvigorate growth in New Zealand's dairy industry.
For those farmers with suitable land, a switch to dairy farming may be a tempting and viable option. This effect will be amplified by New Zealand's sheep farmers having received poor returns for their lambs during the 2006/07 season. This could again increase the rate of dairy conversions, further shifting New Zealand's farming sector away from sheep in favor of dairy cows.
Several factors will influence the number of conversions, including the perceived future profits from milk versus lamb (up until recently, sheep farmers were earning good returns from lamb), and the cost of dairy conversions as interest rates and farm costs continue to increase.
