Milk price forecast revised upwards to $7.40

Fonterra cut its earnings forecast to 25 cents-30 cents a share and its dividend to 15c-20c in...
Photo: ODT files
Westpac has revised its farmgate milk price forecast for the season from $7.10 to $7.40 on the back of stronger than expected dairy prices so far this season.

Dry weather was also creating a risk prices could even go higher in the short term, senior economist Michael Gordon said.

However, the bank’s forecast still allowed for some easing in world prices over the year as China’s economic growth slowed and trade tensions remained high.

Dairy auction prices continued their positive start to 2020 with an overall price lift of 1.7% in last week’s GlobalDairyTrade auction.

There was a risk world prices could be squeezed higher in the near term, as dry weather restricted the global milk supply and that was especially the case for New Zealand, Mr Gordon said.

Dairy Companies Association of New Zealand data showed milk collections in November were up slightly on the previous year, and were up 0.5% for the season to date.

But a lack of rain over the summer period had led to a rapid drying-out across many regions, meaning milk production could fall short over the tail end of the season, he said.

ASB senior rural economist Nathan Penny said auction prices had now largely recovered the lost ground at the end of 2019.

"We had put the previous price weakness down to a surprise lift in planned auction volumes by Fonterra, signalling a greater proportion of dairy product would be channelled through the auction platform.

"The price rise at this auction confirms that a knee-jerk reaction to the volume announcement was the driver of the recent price fall rather than any fundamental change in global dairy market dynamics," he said.

ASB maintained its 2019-20 production growth forecast at 0%. It was noting the drought risks.


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