Hold on tight farmers, the future is bright

Wednesday, 18th May 2016

For immediate release

Hold on tight farmers, the future is bright – Farmers’ Forum experts

Leading industry speakers at the DairyNZ Farmers’ Forum held in Hamilton this week reaffirmed the view that while another year of low milk prices is on the horizon, the long-term outlook for dairy remains bright.

Deputy Prime Minister Hon Bill English, Fonterra CEO Theo Spierings and Rabobankhead of food and agribusiness research and advisory, Tim Hunt, all reiterated that global demand for dairy products will continue to grow.

Mr English said in the government’s view, the dairy industry will remain the engine room of growth as the second biggest New Zealand exporter behind tourism. But facing up to the reduced milk price is the current challenge.

“The next five years is the real test for how competitive we really are on the global market. We all got a bit complacent of the New Zealand dairy industry’s dominance in global markets.”

Mr English said New Zealand benefited economically from the dairy industry when it needed it most, during the global financial crisis.

“I would like to thank the dairy industry for pulling this country out of the recession in 2008, when the milk price generated the revenue, paid the tax, helped us stave off the pressure on the government’s books and, in particular, lifted the general confidence in regional New Zealand,” said Mr English. “It’s something of an untold story.

“Now other primary industries are doing the work and dairy is under a bit of pressure.”

Mr Hunt said Rabobank’s expectations were that demand for milk will continue to grow, led by emerging markets.

“We are amidst a distressing ‘super cycle’ and the protracted downturn looks likely to extend into the 2016/17 season,” says Mr Hunt. “This is our third major downturn since 2008, it’s important to reflect on that and make better decisions for when the next downturn comes.

“New Zealand pasture-based dairying is likely to remain competitive.”

Fonterra CEO Theo Spierings said the long-term trend for dairy is good.

He said the globally traded dairy market involves 66 billion litres of milk and that is projected to increase to 91 billion litres by 2020. “That is why the long-term prospects of dairy are good.”

The topic of ‘disruption’ also came up throughout the two-day event, held May 17-18 at Mystery Creek Events Centre, attracting over 800 attendees.

Mr Spierings said dairy needed to avoid falling into similar situations as the media, taxis and music, which have all been disrupted by new business models which have seized business. “Retail is the next in disruption because of online buying,” said Mr Spierings.

“So we need to be part of that because the new generation has different nutritional needs and think of food differently. Nutritional needs are going to expand extremely fast.”

Mr Spierings said Fonterra is currently working on a ‘disrupt’ business model.

“If we do not disrupt, we will be disrupted. Disruptive business models – that will bring change, that will make a difference.”

DairyNZ chief executive Tim Mackle said being the most competitive and responsible in the way we farm remains key.

“We have got to maintain a collective approach to converting the opportunities. We have to keep the focus on being competitive and responsible, with a low-cost base structure to launch value add from,” says Mr Mackle.

“It’s finding that sweet spot of strong, robust cost of production and high food integrity.”

ENDS

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