Dairy farmers will get only $3.90 per kilo of milk solids in the next payout from Fonterra. Just 3 years ago, the price was $8.40. The government believes between 5% and 10% of dairy farmers will become bankrupt if prices do not improve very soon. For most dairy farmers, $5.25 is the price they need to break even. This means the money coming in is the same as the money going out. Equipment for producing milk is expensive – milking machines and steel tanks to store the milk cost a lot of money. Most farmers borrow money from banks to buy these things so they have big debts. In total, farmers in NZ owe $37.9 billion to banks.
The low dairy prices are having an effect not only on dairy farmers but also on business. Both small and large towns in the dairy farming areas are feeling the effects. Farmers don’t have money for anything except the basics. They can’t afford to buy new machinery or fertilizer to improve the grass. Farming families don’t have extra money for shopping, for cafes or restaurants, for movies or any luxuries.
One in 5 small businesses have lower profits because farmers are not spending. The dairy industry was our biggest export earner at about $13 billion a year but tourism has just overtaken this figure by $0.5 bn.
Listen to July 17 1015 for more about low milk prices.
Vocabulary
• payout (n) – money that the company pays to farmers for their milk
• effects (n) – results of a cause
• milk solids (n) – milk powder
• bankrupt (adj) – the farm could then belong to the bank
• to break even – idiom, money in = money out
• the basics (n) – essential things, only necessary things
• can’t afford – don’t have enough money to buy; note: this is a very common idiom
• luxuries (n) – not essential things but things that give pleasure
• overtake (v), overtaken (past participle) – pass, become more or greater (also used on the highway when we overtake a slower car)