Banks raise milk price forecasts after auction

Strong milk payouts are on the cards for next season after two banks revised their milk price forecasts following yesterday’s Global Dairy Trade auction.

Average dairy prices dropped slightly yesterday morning by 0.1% overall.

However, whole-milk powder prices, which have the greatest impact on farm-gate milk prices, increased 0.4% to $US4097 ($NZ5717) a tonne.

The prices for other products were mixed, the price for butter falling and cheese slightly lifting.

ASB, which was previously forecasting $7.30 per kg of milk solids, revised its price to $7.50 and Westpac raised its 2021-22 price 75c to $8.

Westpac said it expected global dairy prices to remain "stronger for longer" in this dairy price cycle.

However, it expected "a very modest supply" response caused by high grain prices, environmental constraints and competition for land and water from other industries.

ASB also said it expected milk prices to remain "remarkably" high.

While it was still early days, ASB expected Fonterra to open its own forecast at a wide range.

"A less favourable exchange rate is also in the mix, but we predict the impact will be largely offset by the strength in price," the bank said.

Prices were still steady after dairy prices shot up 15% to a seven-year high early last month.

After that, Fonterra lifted its 2020-21 forecast farm-gate milk price range to $7.30-$7.90kgms, up from $6.90-$7.50.

The NZX forecasted milk prices at $7.64 for this season, and $7.48 in the 2021 season.

The 2020-21 season ends on May 31.

- By Riley Kennedy

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