Point of Order: World dairy prices tumble further as farmers face the prospect of being charged for livestock emissions

As debate rages in New Zealand’s farming industries over the Ardern government’s plan for charges on agricultural emissions, prices at Fonterra’s Global Dairy Trade fortnightly auction have fallen to their lowest level in nearly two years.

The average price at the sale fell 3.9% to US$3537 (NZD$6054) a tonne, after falling 4.6% in the previous auction.

Prices have generally been falling since hitting a record high in March, and are now at their lowest level since January last year.

Frank Newman: Interest rates down, dairy prices up

Last week the Reserve Bank reduced the Official Cash Rate (OCR) by 25 basis points to a new low of 2%. The downward shift was widely expected.

Their main reason for doing so was low global inflation and the prospect that domestic inflation would remain below the 1 to 3% target range. Internationally interest rates are at record lows, as economies struggle to gain economic momentum in the face of a slow-down in China and a domino effect elsewhere.

Frank Newman: Dairy by the numbers

The latest fall in dairy prices has raised the level of concern about the sector and more generally about the economy.  The easiest way to cut through the media sensation is to let the numbers do the talking. 

Here they are for the dairy industry.

• 11,500 farmers supply Fonterra.
• $3.85 per kg of milksolids, Fonterra's revised farmgate milk price forecast.
• $8.40 was the payout in the 2013/14 season (the peak).
• $5.40 is the milk price the average farmer needs to break even (including debt repayment costs).

Frank Newman: Dairy prices, Greece, and Ruakaka

The prospects of an early revival in dairy prices have taken another hit. The Global Dairy Trade index was down 10.7% at last week’s auction, and the all-important whole milk powder price (which is responsible for about 75% of Fonterra's farmgate milk price) was down 13.1% to US$1,848, the largest fall in 12 months.

The whole milk powder price is now at its lowest level in six years, down 65% from its peak of US$5,245 in April 2013, and a long way from Fonterra's forecast price of US$3,500 a tonne.

Brian Gaynor: Petrol price still too high

The sharp decline in oil and dairy prices could have a huge impact on the domestic economy as the former is our largest import item and the latter our biggest export earner.

Petroleum imports were $8 billion, or 15.8 per cent of New Zealand’s total imports in the October 2014 year while milk powder, butter and cheese accounted for $15.5 billion, or 30.4 per cent of the country’s exports over the same 12-month period.

The benchmark Brent crude oil price has fallen 45 per cent – from US$115.65 a barrel to $63.16 a barrel – since its year high on June 19 while the important whole milk powder price has plunged 55 per cent – from US$5005 a tonne to $2229 a tonne – since February.