Sunday, October 4, 2009

The NZ Dollar

(click on image to enlarge)

Recently I posted data on cheese and butter imports. Some asked me to cover the imports of MPCs. Actually, MPC imports have declined in recent months.

In spite of convictions by many that supply and demand explains everything. Adam Smith, the so-called father of capitalism, never gave currency exchange rates a second thought. Today, however, exchange rates are all important.

At the same time the New Zealand government ended subsidies to dairy farmers, the government devalued the Kiwi (NZ$). A low Kiwi is a form of subsidy.

MPC imports not only hurt U.S. dairy producers but also, the low Kiwi costs NZ consumers more for all imported items.

As the above table shows, there is a connection between MPCs and the relative value of the NZ dollar.


  1. John,
    An Australian producer told me at WDE this week, that they have two types of producers in Australia, domestic producers get paid over 60 cents per liter and seasonal producers get paid around 24 cents per liter. He went on to say, countries need to be sure to take care of their domestic producers first. He said no one can make milk at the world market price as most of it is dumped product. Virtually every country loses money making it and it forces the rest of world market prices to tank. We need to let more U.S. producers know this story. Australia & New Zealand have two prices, domestic & international & no one can survive trying to make milk at international price.

  2. John,

    I have two thoughts after reading your reports on imports.

    The first is, if the graphs Sherry Bunting put together would indicate the drop in MPC imports should lead to higher US milk prices.

    The second thought is the industry uses imports to keep down our prices. They are having to resort spending more to import more finished products. This leads me to believe that their financial ability to suppress our price with imports is about to decline.

    Steve Barton