Milk - Who Will be the Winner.Thursday, Aug 10, 2000
MAF's Farm Monitoring report shows some optimism for the growth of NZ's total dairy exports and an opportunity
to dominate world markets.
However the report says little about the effect such potentials have on the farm gate price that may
be received for milk in the medium term.
If NZ milk producers had control of the international market and could set world market prices what
would be a satisfactory farm gate price per kg of milk solids. $4.00? $4.50? Perhaps $5.00. Could
it not be at those prices other international producers could compete equally as well and see the
potentials of devising lower cost production systems than they currently employ.
We all know how costs expand to meet the available income and how subsidies are captured by the processing
chain rather than the farmer..
Optimism for beneficial effects from the intervention of the WTO on unfair trading constraints may be
well founded, but we should be aware that a changed market environment could bring about a different
approach to production efficiencies by Northern Hemisphere milk producers.
NZ prides itself on having the lowest farm cost of production but at 33 cents a litre at the farm gate
farmers are receiving less than 20% of the retail price of milk. Milk has no value until the consumer
purchases it. A 5% on farm improvement in production efficiency affects milk by 1.5 cents.
Who captures that efficiency is a moot point but the outcome is on farm efficiency is having a diminishing
effect on the final price of milk at retail in all its many forms.
Good calving and heaps of milk!