High dollar may take ‘cream’
Fonterra Co-operative Group’s 2.3 per cent revision downward of its milk price forecast for the 2011-2012 season demonstrates the trade-exposed nature of our primary industries, Federated Farmers says.
With the present global economic outlook, this may not be the only revision for the 2011-2012 season.
Federated Farmers dairy chairman Willy Leferink said: ‘‘I don’t think there are many farmers who were not expecting a downwards revision.’’
‘‘We had indications from the Global Dairy Trade auction that prices have been drifting south. Most economic forecasters also expect commodity prices will ease over 2012. It’s fair to say the international picture is more than a little choppy, especially with China revising its gross domestic product forecast downwards,’’ Mr Leferink said. ‘‘This is the reality New Zealand’s primary exporters have to deal with.
‘‘We’re completely trade-exposed and it’s a fact of life for us. Times can be good but we also know from the 2008-2009 season, they can be pretty hard too.
‘‘While the primary industries are generally growing, overall sector debt levels aren’t. Many farmers have heeded our advice to run conservative budgets focussed on reducing debt.
‘‘That said, we’re increasingly anxious over how the Kiwi dollar is defying gravity. While soft commodities are correcting our dollar ought to be doing the same, but isn’t.
‘‘While good growing conditions have helped us put in a blinder of a season, a high dollar could well skim the cream,’’ Mr Leferink said.