An updated assessment of dairy sector vulnerabilities

Release date
Vol. 78. No. 8. December 2015
Ashley Dunstan; Hayden Skilling; Matthew Newman; Zach Mounsey

Low global milk prices are placing dairy farmers under significant cash flow pressure. This article investigates the severity of these cash flow pressures, and the potential financial stability implications if the payout remains low for an extended period. Most farmers are estimated to make cash losses in the current season, compounding cash flow pressures experienced in the later part of the 2014-15 season. Despite some farms with high debts facing considerable difficulties, most farms are expected to remain viable over the medium term. Losses for the banking system as a whole are estimated to be manageable even under a severe stress scenario for the dairy sector.