Dairy industry well positioned for future

Economist Cameron Bagrie talked about what is driving change, and what it means for farmers.

Economist Cameron Bagrie had an optimistic message for the 150 farmers who gathered at the Waikato Dairy NZ Farmers Forum in March.

He believes the industry is well placed to weather challenges, but it will take some hits.

On the plus side, he says while there is more work to be done, the New Zealand dairy industry is ahead of its international counterparts on putting in place strategies for sustainable environmental management.

Cameron also talked about the consumer-driven trend of moving away from shareholder capitalism – a system driven by short-term results – to a stakeholder capitalism model, where a long-term focus drives decisions, and businesses are there to serve not only their shareholders, but also employees, customers and the planet.

Again, says Cameron, the Kiwi dairy industry is already on this journey. He also discussed the areas where farmers will likely take a hit, including debt.

The high proportion of interest-only loans in the dairy industry, compared to other sectors, is an area where farmers can expect to continue to see change.

“Low interest rates have been distorting the price of risk, and as a result risk has been mispriced. Lending standards have been tightened, and this will continue.”

He also talked about a range of factors impacting on farmer confidence including uncertainty around compliance regimes, and disruptors like plant-based protein and the impact of large-scale natural weather events.

Plant-based protein is an opportunity rather than a threat, and Cameron describes it as an “economic reality” to feed the world’s burgeoning population.

He also urged farmers not to be complacent about the rate of change, which is happening quicker than ever before. Failure to adapt and evolve would lead to the dairy industry falling behind, he said.

“Think about what’s going on globally,” says Cameron. “But put effort into what you can influence at a micro level on your farm.”

“Putting your head in the sand is not a strategy,” says Cameron, who encouraged farmers to focus on the things that they can control.

Coronavirus, or Covid-19, is gearing up to be a global economic issue according to Cameron, and its effects will be felt for some time to come.

He says Coronavirus has undermined oil demand, which resulted in a sharp fall in oil prices in early-March. “This is something for Kiwi farmers to watch, because there has traditionally been a correlation between oil prices and dairy commodity prices.

“Coronavirus is derailing the global supply chain, but I agree with Minister of Finance Grant Robertson and Reserve Bank Governor Adrian Orr that New Zealand is in a good position to handle global turbulence.”


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