The Global Dairy trade auction overnight saw prices of Fonterra’s products lift by 10.9% to $US2,226 a tonne. While volumes were down slightly (1,039 to 35,865 tonnes), this is a ray of light for struggling Dairy Farmers.
A NZ Dollar buys only $US0.6334. This compares to a peak of $US0.8822 in July 2014. How does this help?
The Dairy Farmers have received some assistance from the weaking NZ Dollar against the US Dollar as well. To put it in absolute terms, 1 tonne at current prices and the current exchange rate equates to $NZ3,514.37. To obtain the same return back in July 2014, the tonnage rate would have needed to be, on average, $US3,100.38.
Dairy Futures are also showing an expected value of $US2,500 by April 2016. At the current exchange rate (and most economists expect the NZ Dollar to continue to weaken against the US Dollar), this would equate to $NZ3,946.95.
So, a little recovery in prices and a drop in our exchange rate are certainly a step in the right direction for our Dairy Farmers.
Lincoln Sharp - Thinking Forward 