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7 MPI’s advisers fan out after floods Vol 21 No 30, August 7, 2023
Price pain for key exports Neal Wallace, Gerald Piddock and Hugh Stringleman
MARKETS
Food and fibre
F
ARMERS face a financially lean few months as global animal protein markets remain stubbornly weak. With the start of the new export season arriving, high global inflation is creating consumer uncertainty and the key Chinese market remains subdued, taking longer than expected to recover from the covid pandemic. Add to that on-farm inflation of 16.3% for sheep and beef farmers and 13% for dairy, and the financial picture is grim. AgFirst economist Phil Journeaux described the situation for dairy farmers as serious. “The payout is dropping, we have had near-record on-farm cost inflation and interest rates have doubled. “Most farms made a loss last year and they’re going to make an even bigger loss this year.” It is a similar picture for sheep and beef farmers, with Rabobank noting lamb prices fell 7% in July to a five-year low. Beef is showing some resilience and international fertiliser prices have fallen, with urea easing 15%, DAP 35% and potash 39%. Subdued consumer activity in
China is driving much of this weak demand. A Ministry for Foreign Affairs and Trade report noted that, according to official Chinese statistics, the economy grew 6.3% in the second quarter of this year, below market expectations. Rabobank’s Agribusiness monthly says global dairy supplies are increasing, including in China, but prices there have fallen 10% year on year. Weak consumer confidence is behind a significant fall in last week’s Global Dairy Trade auction, which commentators said could push the farmgate milk price for the coming season into $7/kg territory. “The price fall reinforces that global dairy market confidence remains at a low ebb, with few signs of a turnaround on the immediate horizon,” Westpac senior agri economist Nathan Penny said. Prices in last week’s auction fell for five of six dairy commodities, causing the GDT index to drop 4.3%, led by an 8% decline in the price for whole milk powder. Alliance Group global sales manager Shane Kingston said the Chinese government is talking about introducing policies to Continued page 3
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TECHNOLOGY 12
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NEWS 3
FARMSTRONG 16
OPINION 22