Westpac economists lower their milk price forecast for new season after sixth consecutive fall at global dairy auction; say financing costs may rise for farmers

Why no mention of the removal of Dairy farm milk quotas in Europe? Dutch and English Dairy companies are expecting significant increase in milk production from their suppliers. The Dutch dairy coop FrieslandCampina has built two new factories in anticipation of increased milk flow, as does Fonterra, the Dutch will process what ever volume of milk is produced. I can't imagine that increased milk production will be kept only to the Dutch and UK in Europe. It would also be reasonable to expect that increased milk production will not all (if any) be absorbed in Europe. I would expect dairy product prices will remain weak to lower, especially as global economic growth is likely to be lower than forecast.

But we think the most likely response is that the RBNZ would require banks to hold a larger capital buffer against their existing agricultural loans, to absorb an expected rise in defaults. "If so, the cost of holding that additional capital buffer would be factored into the interest rates for farm lending."

What does this mean?
1. That debt mediation legislation must be passed ASAP - if defaults now the new "expected/black"

2. Wouldn't more capital to support rural lending, make rural loans less risky, so the comparative.margin rate should come down.

3. That Banks been taking too much margin to profit regarding rural loans, given their terrific profits and its their shareholders than need adequately capitalise their business.

4. Do Banks bear responsibility in that their lending cashflow farmgate milk price (LCFMP) will probably be above actual farm gate returns two years in a row. (every GMP 15/16 price level is less banks LCFMP).
For instance you try getting a loan from a bank with your own estimate of farmgate milk price $ to show servicing of the borrowings.

5. Again a fewer reasons to be paying top dollar for milk in Ozz, and bottom dollar here (every 20 to 30 cents/kg is likely to count). - every GMP 15/16 price level is less LCFMP

Where will the low point be $4 or $3.50 and does anyone really believe we can get back to $5.75 in the next 18 months in a world where commodity prices are falling?

It is perhaps looking as though 'the great plan' to float the NZ economy on a sea of milk is rather holed below the waterline. It was never sustainable, so better we find out now than a few years hence.

Still little comment on Ralph Norris' resignation on the day Fonterra were to give their update. The resignation came instead. The update was made public early in the morning the next day. The two have to be linked. How can they not. Norris must have flabbergasted with the rest of the board. Thats a polite way of putting it. Journalism has gone to pot. Why arent hard questions being asked as to why such a valuable director walked away.

Another boost to corporate dairy: buy the dips....

In real terms, I believe the 2014/2015 payout is the worst in Fonterra history; nominal comparisons to 2006/2007 are naive.

Amazing how many people seem to be already banking the cash from near-term higher dairy prices. I suspect there's a bit more to play in this saga, prices have not reached their trough, and there won't be much of a recovery. NZ dairy (and much of the wider economy by proxy) is in for a rough ride!

Wilson's company is still converting big time. The media in NZ are dead useless.So many local issue stories about this guy but his PR machine sweeps everything clean. Wake up and smell the bullshit.