Fonterra is now forecasting a total milk price of between $5.25 and $5.35 per kg milk solid (26-26.5 c/l) for the 2016/17 season
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The rise in NZ milk prices should be enough to head off a major banking disaster caused by record high dairy farm debt in one of the world’s largest dairy exporting countries.
According to Reserve Bank of New Zealand, dairy farm debt exceeded $40bn (€26bn) in June this year. This figure has risen from $11.3bn (€7.35bn) in 2003. Debt per cow exploded from $3,000 (€1,950) to $8,000 (€5,200) during the same period.
The Reserve Bank of New Zealand has said that the New Zealand banking system is robust enough to weather a severe financial strain in the dairy industry after conducting a stress test on the country’s five dairy lenders late last year.
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The test suggested that the banks would increase their lend to dairy farmers to help them manage the negative cash flow period even though they would face loses from a prolonged downturn in the dairy sector.
The outlook for milk prices has improved in New Zealand since then with Fonterra forecasting a total milk price of between $5.25 and $5.35 per kg milk solid (26-26.5 c/l) for the 2016/17 season.
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The rise in NZ milk prices should be enough to head off a major banking disaster caused by record high dairy farm debt in one of the world’s largest dairy exporting countries.
According to Reserve Bank of New Zealand, dairy farm debt exceeded $40bn (€26bn) in June this year. This figure has risen from $11.3bn (€7.35bn) in 2003. Debt per cow exploded from $3,000 (€1,950) to $8,000 (€5,200) during the same period.
The Reserve Bank of New Zealand has said that the New Zealand banking system is robust enough to weather a severe financial strain in the dairy industry after conducting a stress test on the country’s five dairy lenders late last year.
The test suggested that the banks would increase their lend to dairy farmers to help them manage the negative cash flow period even though they would face loses from a prolonged downturn in the dairy sector.
The outlook for milk prices has improved in New Zealand since then with Fonterra forecasting a total milk price of between $5.25 and $5.35 per kg milk solid (26-26.5 c/l) for the 2016/17 season.
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