Westpac has revised its 2013-14 milk price forecast up 90c to
$8.30kg ms, saying world milk prices ''continue to defy
The bank had expected the New Zealand supply rebound and
China slowdown would bring prices down, economist Nathan
The reduction in auction volumes offered by Fonterra has had
a major impact. The co-operative expected the volume of whole
milk powder offered in the GlobalDairyTrade auctions this
season would fall by 20%, compared with last season, Mr Penny
The first-round impact of reduced auction volumes had been
apparent with buyers supporting prices at what were very high
levels. After falling to about $4600 per metric tonne in
June, weighted average whole milk powder prices had held
above $5000 per metric tonne over the past four auctions.
The second-round impact was ''really interesting''. As
Fonterra moved into retail markets such as the market for
Chinese infant formula, increasing competition, retail prices
should fall, he said.
The recent Chinese pricing inquiry had already forced some
reduction in retail prices. Lower retail prices would
increase the quantity of milk consumers demanded.
In turn, those higher quantities would put upward pressure on
wholesale prices, such as GDT auction prices. Breaking down
retailers' pricing power benefited both consumers and
wholesalers, Mr Penny said.
He saw world prices holding at ''very high levels'' for
another couple of months before the rebound in New Zealand
milk supply kicked in.
''Back in July we had anticipated a 20% fall in whole milk
prices by the end of the year. Now we expect a fall closer to
Prices dropped 1.1% in this week's GlobalDairyTrade auction.
The biggest fall was in milk protein concentrate, down 3.8%,
followed by cheddar (down 3.2%) and rennet casein (down
2.1%), while anhydrous milk fat lifted 3.1% and butter was up
Synlait Milk has followed in the footsteps of Fonterra and
Westland Milk Products and bumped up its forecast milk price.
As well as lifting its forecast from $7kg ms to $8kg ms, the
Mid-Canterbury milk processor has also lifted its advance
rates for the season from $4.50 to $5.
The company will process more milk than forecast this season
following a decision to take a ''significant'' allocation of
milk under the Dairy Industry Restructuring Act in the year
to July 2014.
The decision was made after further planning and a small
investment in plant and equipment resulted in an opportunity
to increase production capacity of its ingredients products
without impacting the forecast infant formula and nutritional
products business, the company said.
While the total volume of milk expected to be taken was still
to be finalised, an allocation of up to 50 million litres was
Higher-than-forecast revenue from high commodity prices and
additional processing volumes meant the company remained
confident of achieving its forecast financial result,
managing director John Penno said.