This, coupled with the government’s emissions pricing plan that was released for consultation, it’s no wonder farmer confidence has barely shifted into positive territory.

That plan will see farmers report their emissions using a “calculation engine” and pay an annual split-gas levy for their methane and long-lived gas emissions.

As a carrot, they will also receive incentive payments for taking up technologies and practices that ensure emissions reductions.

Using He Waka Eke Noa’s indicative pricing of methane + nitrous oxide/carbon dioxide minus the benefits from innovations and sequestration, AgFirst economist Phil Journeaux said that levy could be around $5817 in 2025, rising to $18,580 by 2030 based on a 133ha, 368-cow farm.

These are numbers Journeaux released in July and he says they are largely unchanged in light of the government’s proposal.

DairyNZ is in the process of modelling what those costs could be and whether it will push production costs above break-even point.

Meanwhile an insipid global dairy market has seen prices going one step forward and two steps back in the past few GDT auctions. After lifting 4.9% and 2% through September, the index fell again in October.

NZX dairy insights manager Stu Davison, speaking after prices fell 3.5% on October 4, said the auction had roughly reset the market back to the price point found at the end of August.

“But where to from here is the biggest question of all,” he said ominously in his analysis that day.

It was, as it turns out, a nosedive, falling 4.6% two weeks later on the back of weak demand.

“The market was bearish prior to this auction, and this result will put a few aspects of the market into a recheck phase.

“Undoubtedly, we will start November with a very different aspect. It would seem we’ve seen enough evidence to finally assume that consumer impacts are now being felt back through the supply chain, which if true, will mean that prices have further to retreat,” he said.

This auction saw whole milk powder prices fall 4.4%, meaning prices over October have essentially given back all their gains over the two September auctions, Westpac’s senior agri economist Nathan Penny said in the banks’ fortnightly Dairy Update.

Penny said the result came against a backdrop of economic weakness in China as it continues to persevere with its covid zero policy with its movement restrictions weighing on economic activity.

“Dairy markets may have been hoping for some relief on this and in the absence of any, have priced further weakness in global dairy prices.”

Supply remains weak and in theory should keep prices high, but this weak demand is certainly putting pressure on prices.

While it maintained its $9.25/kg MS forecast – albeit with downside risks – ASB has revised its forecast to $9.40/kg MS from $10.

“Given the ultra-tight global supply outlook, we’re still picking dairy prices to head higher, but the demand just isn’t there right now and that weighs heavily on our forecast, given prices for a huge chunk of the season’s product are being struck right now,” it said in its Rural Economic Note.

Over the medium term it is doubtful supply will meet demand, meaning a boon for dairy prices. Add in a very weak NZD and you get a positive outlook for farmgate returns.

“But for now, the near-term demand just isn’t there,” the note said.

The bank blamed the high US dollar, ongoing disruption in consumption patterns from China’s periodic lockdowns, and relatively strong Chinese milk inventories.

“The truth is probably some combination of all three.”

It was also tentatively optimistic that the 2023-24 season will get off to a strong start, based on demand continuing to be stronger than supply and the likelihood that the NZD remains low against the US dollar over the coming months.