Wednesday, 14 March 2018 08:55

$6.50kgMS payout still possible

Written by  Pam Tipa
Doug Steel. Doug Steel.

The GDT auction last week was close to expectations, and even included a slightly positive surprise with a 5.5% jump in skim milk powder prices, says BNZ senior economist Doug Steel.

Overall dairy prices eased 0.6%. 

“This was close to expectations,” Steel told Dairy News. “If anything, the decline was not quite as big as the indicators intimated. The GDT Price Index is up 12.2% year-to-date and 9.8% on a year ago.”

Whole milk powder (WMP) prices fell 0.8%, to an average price of $US3232/t. 

BNZ is now forecasting a $6.30/kgMS milk price for the 2017-18 season, but Steel says something like $6.40 or $6.50/kgMS is easily within the realms of possibility. 

“Ultimately, the final figure will depend on what effective exchange rate Fonterra has managed to achieve. 

“Fonterra is due to provide its half year update later this month, where the co-op will provide its latest guidance for milk price (which sits at $6.40/kgMS) as well as for earnings and dividend.”

With the focus shifting to the next season, Steel says the general view is that dairy prices will ease later in 2018. This is based on expanding supply, particularly out of the EU, and the influence from the EU intervention programme.

“However, there are a few global weather issues now challenging this thinking, including cold weather across parts of Europe [that could materially restrict near term production],” he says.

“Drought in Argentina and dry in parts of the US that, combined, have seen grain prices push higher over recent weeks are also worth watching.

 

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