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New Zealand moves to spur dairy exports

In an attempt to increase dairy exports, the Reserve Bank of New Zealand cut interest rates by a quarter-percent to 3.25 percent.  The move immediately pushed the “Kiwi dollar” to a two-year-low, falling below 73-cents U.S. for the first time since June of 2013.  The Bank hinted another reduction may be possible.  It is hoped the cheaper NZ dollar will make their dairy products cheaper on the global market thus increasing export business.

The overall index at the Global Dairy Trade auction has fallen to its lowest point since July of 2009.  The plunge in global dairy prices prompted by a lack of Chinese purchasing has caused major problems for New Zealand dairy, the largest segment of the country’s economy.  Rabobank projects New Zealand farm income this year will be nearly half of what it was in 2014.

The farmgate price for the just-ended 2014-15 production year was NZ$4.40 per kilogram of milk solids, a seven-year low.  For most, that is below the cost of production.  The Reserve Bank of New Zealand says a quarter of the nation’s dairy farmers will have a negative cash flow this year.

Fonterra, the cooperative which handles about 90 percent of the country’s milk and largest exporter in the world is planning to cut 16,000 workers as part of a restructuring in the coming months.