Editorial: Record dairy payout a welcome relief amid Covid's trying times

The dairy industry is headed for a record payout this year. Photo / Michael Cunningham

Editorial

OPINION:

While city folk may be hunkering down in preparation for the predicted rise in Omicron cases, the economic heroes of this year look set to be New Zealand's dairy farmers.

New Zealand has traditionally had two major export earners: tourism and dairy. But Covid-19 has left our international tourism market in tatters.

While Kiwis have got out and about to enjoy a good summer of domestic tourism, it will never be enough to replace the higher-spending overseas visitor market.

News this week that Fonterra has lifted its 2021/22 forecast farmgate milk price range to $8.90-$9.50 per kg of milksolids, up from $8.40-$9/kgMS, previously couldn't come at a better time.

This increases the midpoint of the range, which farmers are paid off, by 50 cents to $9.20/kgMS.

If the forecast comes to pass, it would be the highest milk price paid by the co-op in its two-decade-long history and at the mid-point would mean $13.8 billion being pumped into the New Zealand economy.

That's money farmers can spend in their local communities, on new machinery and vehicles, and paying down debt.

The higher payout is being driven by strong demand for dairy at a time when supply is falling below average as European milk production is down and US milk growth slows because of high feed costs.

Dry conditions in parts of New Zealand like the Waikato has also meant lower production here; production for December was down 5 per cent compared to November.

Earlier this month Fonterra reduced its forecast milk collections for 2021/22 from 1525 million kg of milksolids to 1500 million kg because of varied weather and challenging growing conditions.

Some rain this week will have been a little relief but nowhere near enough to take away the problem.

Last week Niwa predicted drought conditions for Northland and Southland, and some parts of the country may have to prepare for a third consecutive year in drought.

At the same time Covid-19 is presenting worries for farmers, given the potential for workers to get sick or need to self-isolate on top of issues with the tight border making it difficult to get extra labour.

Potential closures at meatworks could also mean farmers may need to keep stock, and dry conditions could also affect their ability get enough feed for the stock they might have to keep.

There is still plenty to worry about.

But thank goodness the dairy payout looks like it will be a good one.

As long as the world wants to drink and eat what New Zealand produces and we can produce enough and get the supply out it should stand the economy in good stead.

New Zealand might not be firing on all cylinders, but at least one of our major exporters is on a roll.

Tourism may make a comeback this year but it is likely to take many years before global tourism returns to anywhere near where it was before the global pandemic hit.

Until then, let's hope New Zealand can continue to rely on its dairy industry to be a good earner.