Mr. Bernard Condon:

A question we are frequently asked, particularly when we are in front of farmers, is what is a sustainable milk price and what type of milk price should we be putting into our long-term forecasts and budgets. We can only take it from the market perspective, although there is another side, which is the cost of production. From a market perspective, we see markets functioning in an appropriate way when milk prices are between 28 cent and 32 cent per litre. At that level, generally speaking, a reasonably efficient farmer can make a decent living and, generally speaking, it is a reasonably affordable level that allows developing world demand growth at an acceptable level.

The only other point I would make is that, particularly at the low end, it looks very lean compared to the average cost of production, which was discussed earlier. The cost of production was calculated when the milk price was in the high 30s, and when the milk price is between 28 cent and 32 cent we would expect the input prices to come back, so there would be an impact on margins.