20 June 1997

NZ dairy men face 6% milk price cuts

NEW Zealand dairy farmers face a 6% drop in milk price this year, bringing the average return down to 8.9p/litre and follows on the heels of a 12% cut last year.

On his annual visit to London, New Zealand Dairy Board chairman, Sir Dryden Spring, said the fall would curb production.

Last year milk output leapt by 12%. "Beef prices have been depressed for some time, and, although sheep prices have been fairly strong, wool returns have been unsatisfactory. So producers have been switching to dairying," explained Sir Dryden.

But the low milk price, a result of New Zealand having to export 95% of its production on to weakening world commodity markets, was unsustainable, he added.

In an attempt to curb production and so increase values, the co-ops had raised the minimum shareholding for each member. "The average farmer now has to hold shares worth about £40,000 in his co-op," Sir Dryden said. Any new entrants had to pay their money upfront and there was already evidence of a drop in the numbers switching to milk production.

Existing producers who wanted to expand also had to buy extra shares to cover higher yields and that, too, was putting a brake on expansion. "The new system puts responsibility on those increasing milk production to pay for the extra processing needed to handle it."

On the export market, wrangles with the EU over New Zealands butter export quota continued to present serious problems, Sir Dryden added. The NZDB launched Anchor spreadable butter on the world market in 1991. But in 1995 the EU commission ruled that it could not be included in the export quota because it was not made in the same way as traditional butter.

The board is challenging the ruling in the courts and through the World Trade Organisation.n