Wednesday, 17 March 2021 06:55

Hefty opening milk price forecast for new season

Written by  Sudesh Kissun
Susan Kilsby, ANZ agri analyst says dairy prices are likely to start the new season at a high level. Susan Kilsby, ANZ agri analyst says dairy prices are likely to start the new season at a high level.

With just under three months to go this season, attention is turning to the opening forecast milk price for 2021-22.

A strong opening forecast milk price for next season – of between $7.25/kgMS and $7.30/kgMS – has been announced, mostly on the back on soaring prices on Global Dairy Trade (GDT) auctions.

However, the opening forecasts come with a warning: it’s still early days and things could change.

ANZ agri economist Susan Kilsby notes that its likely dairy prices will start the 2021-22 season at a high level, but there is certainly no guarantee they will remain at this level.

“At this stage, it is not completely clear what is actually driving the sharp lift in pricing we are currently experiencing,” Kilsby says.

“Therefore, it is difficult to predict how long the current run of stronger pricing will be sustained.

“We anticipate we will see some correction in pricing within the next 12 months, and when this occurs, it may do so at pace.”

The other factor that has a large influence on the farmgate milk price is the New Zealand dollar.

According to Kilsby, the NZD will generally appreciate over the next 18 months, and this will curb returns at the farmgate somewhat.

Westpac senior agri economist Nathan Penny also expects prices to moderate later this year.

Penny says the recent price rises in whole milk powder and milk fat prices have “a New Zealand angle to it”. “New Zealand is the largest exporter of both WMP and milk fats. Skim milk powder prices, in contrast which the EU and the US also heavily export, have increased by a more modest 22% since November.

“The implication is that this latest increase will prove temporary…New Zealand has entered its autumn and the season is winding down,” notes Penny.

Dairy farmers around the world are also expected to boost production to cash in on the high milk price. Penny expects the impact of this response will come to bear from around midyear, with prices beginning to moderate.

ASB economist Nat Keall is more optimistic.

He says the bank’s opening forecast milk price for next season of $7.30/kgMS could jump by 20c.

“Even if we were to conservatively assume much of this latest price spike unwinds over the next couple of months, there is now significant upside risk to our recently-made milk price forecasts for both seasons,” he says.

 “The challenge for determining the dairy price outlook is how much of this price spike is supply covering that will be offset later by reduced buying demand versus a more fundamental (and more sustainable) lift in underlying demand.

“Spikes in other commodity prices – including animal feed – do point to elements of a more general surge in commodity demand.”

More like this

50 years a banker and still learning

ANZ Rural Bank Manager Roger Fannin has been working in banking for half a century all over Hawke's Bay - all the way back to the post office days. He shares his thoughts on the good times and bad times and reflects on the events that shaped his career.

Bank optimistic on milk price

An improvement in global markets and a weak New Zealand dollar are behind the ANZ Bank's optimistic prediction of a $7.70/kgMS farmgate milk price for this season.

More milk keeps prices soft

A better than expected start to milk production in New Zealand has softened global dairy prices, says Westpac senior agri economist Nathan Penny.

Are dairy prices moving from pain to gain?

A full rebalance of China’s dairy market is not expected in the near future, so dairy farmers in New Zealand and around the world will need to manage through more financial pain in the months ahead.

Featured

Ploughing Champs success

Sean Leslie and Casey Tilson from Middlemarch, with horses Beau and Dough, took out the Rural News Horse Plough award at the Power Farming NZ Ploughing Championships at Horotiu, near Hamilton, on April 13-14.

Farmers oppose work visa changes

Farmers are crying foul over changes announced by the Government this week to the Accredited Employer Work Visa (AEWV) scheme.

National

Share farmers with big plans

With only about eight weeks to go before their cows are dried off, the 2024 Manawatu Dairy Industry Awards Share…

Team effort brings results

For the team at Westmorland Estate Limited in Waikato, it has been another year of everyone working together to achieve…

Machinery & Products

New name, new ideas

KGM New Zealand, is part of the London headquartered Inchcape Group, who increased its NZ presence in August 2023 with…

All-terrain fert spreading mode

Effluent specialists the Samson Group have developed a new double unloading system to help optimise uphill and downhill organic fertiliser…

Can-Am showcases range

Based on industry data collected by the Motor Industry Association, Can-Am is the number one side-by-side manufacturer in New Zealand.

» Latest Print Issues Online

Milking It

Avian flu in cows

A lethal form of avian influenza has been confirmed in US dairy cattle in Texas and Kansas, the US Department…

China trade

OPINION: Last week's revelation that data relating to New Zealand MPs was stolen amid Chinese state-sponsored cyber espionage targeting two…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter