Bank raises farmgate milk price forecast

Westpac has lifted its 2020-21 farmgate milk price forecast by 50 cents to $7.50/kg — 20c above the upper end of Fonterra’s forecast range.

If it happens, a $7.50/kg milk price would be one of the highest in the co-operative’s 20-year history.

In addition, Westpac has increased its 2021-22 milk price forecast by 25 cents to $7.25/kg.

Most economists have forecast a $7.00/kg milk price for the current season but have said a stronger New Zealand dollar could weigh on the season-ahead milk price.

Fonterra’s current range for 2020-21 is $6.70/kg to $7.30/kg.

"The forecast lifts are on the back of surging global dairy prices, particularly at the start of this year," Westpac agri economist Nathan Penny said in a research note.

Since early November, overall dairy prices have jumped 17.2%, and more than half of the lift has occurred since the start of the year.

Fonterra’s farmgate milk price has exceeded $7.00/kg only four times in the co-operative’s 20-year history.

In the 2007-8 season, it hit $7.59/kg; in 2010-11 it reached $7.60/kg; and in 2019-20 $7.14/kg.

The peak was $8.40/kg in 2013-14.

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