NEW ZEALAND – A “substantial improvement” in dairy prices is on the cards for mid-2016 following a severe cyclical downturn in dairy prices, Rabobank has assured despite conflicting analysis.
The agri-business investor has clashed with some industry commentary, stressing that current “ugly” dairy prices do not mean long-term challenge in the sector, which for New Zealand producers still holds “plenty of upside”.
Rabobank CEO Ben Russell said that, contrary to some industry analysts, the price trough is not indicative of a permanent change in supply and demand dynamics.
He emphasised that nothing seen in 2015 has altered long-term fundamentals, adding: “Current market conditions are not the ‘new normal’, but a highly abnormal part of a difficult cycle.”
“While the season ahead will undoubtedly be difficult for dairy farmers, the bank is firmly of the view that prices will recover to more sustainable levels over the medium term.
Discussing a recent client report – Dairy Industry Note – Riding Out the Storm –, Mr Russell said: ”New Zealand remains very well placed to continue to play an important – and overall profitable – role in this improved future for the global dairy industry, the Rabobank report says. “But first it must ride out the storm.”
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