Cheap butter, bad news.

Thu, Oct 23, 2008

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An article published by the Reserve Bank in 2007 commented on the rise of dairy prices as “very good news for the New Zealand economy”. Is it therefore fair to argue that the recent precipitous drop in dairy prices is “very bad news”.

The price drop will worsen New Zealand’s trade deficit, and suppress domestic demand, especially in the rural economy. Rural land prices look very inflated. There should be some benefit to inflation with reduction in prices of milk, cheese and butter.

Recent prices from Agridata.co.nz illustrate the new environment.

One Response to “Cheap butter, bad news.”

  1. Allan Says:

    That really depends. If your currency is falling along with the price of dairy – then you could turn your stuff into cheese and export it to all the cheese-hungry nations of the world.

    Reply

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