NZ. Palm kernel imports drop sharply as farmers adjust to lower milk prices

New Zealand imports of controversial feed supplement palm kernel expeller (PKE) fell by about one third last year, reflecting cost-cutting measures as farmers adjusted to sharply lower milk prices.
Data out this week showed PKE imports came to 1.5 million tonnes in 2016, down from a record 2.2m tonnes in 2015 and 2.12m tonnes in 2014.
Environmentalists are against the use of PKE - a by-product of the palm oil industry - because they say it promotes deforestation.
Fonterra has discouraged its use as it says it detracts from New Zealand's image as a predominantly pasture-based dairy producer.
AgriHQ dairy analyst Susan Kilsby said farmers were still very conscious of their costs, despite the Fonterra milk price improving to $6 per kg of milksolids from $3.90/kg in 2015/6 and $4.40/kg in 2014/5.
A milk price of around $5.05/kg is regarded as the break-even point and the past two seasons have prompted many farmers to borrow heavily.
"The milk price has picked up but it has not really picked up at the farm level yet," she said. "Farm overdrafts are still incredibly high.
"It's going to be take at least until the end of this season for them to make up any ground."
Analysts do not expect to see demand pick up for PKE, although Kilsby said farmers use it "to fill the gaps where it makes sense".

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