Govt announces study into high-performing farms as farmers told population growth will revive markets.

Primary Industries Minister Nathan Guy gave a group of Waikato farmers a pep talk yesterday, saying the dairy price downturn would see its way out and the medium to long-term prospects remain sound.

Nathan, addressing a "cowshed" meeting of about 80 farmers on a farm near Morrinsville, said there was no doubt that farmers - most of whom are now producing milk at well below the average cost of production - were doing it tough.

"Low global prices are having a real impact on cashflows and farmers are rightly focusing on their business decisions and on-farm costs," Guy said.

The low prices were caused by an unusual set of circumstances, made worse by the lack of a serious weather event in any of the major producing countries.


"The world is awash with milk," he said.

In his speech, Guy said his optimism for the sector was based on world population growth and countries getting wealthier, bringing changed diets and a greater demand for protein. Demand from China is expected to increase by 30 per cent over the next 10 years, and some analysts have picked a 40 to 45 per cent increase in world demand over the same period.

The meeting brought together farmers and others from the rural business community, including the Ministry for Primary Industries, DairyNZ, Federated Farmers, Rural Support Trusts and the New Zealand Bankers Association.

Guy told farmers $175,000 had been allocated for an independent provider to do an in-depth study on innovative low-cost, high-performing farm systems to see what made them successful.

The acting chief executive of the New Zealand Bankers Association, Antony Buick-Constable, said banking had been part of the agricultural landscape for 150 years "and that won't change".

"While it is unusual to see a prolonged, multi-season downturn such as this one, we are not seeing this as a structural issue," Buick-Constable told farmers. "The long-term outlook for dairy and protein production is positive."

Dairy veteran Martyn Sing, who with his son Mark milks just over 1000 cows on their farm near Morrinsville, said there had been three major downturns in his 40-year career - the most severe in 1984.

"The fact of the matter is that the world does not owe us a living," Sing said. "We have always had to adjust to structural shifts in the market and the related pressures that go with that. I suspect there is not going to be a recovery in prices and that it might take two or three years before we see returns for milk lifting."

Dairy NZ chairman Michael Spaans told farmers he was confident the market would turn.

"We are at the bottom of the cycle and I have every confidence that demand will pick up in time and that prices will increase in time."