Farmgate prices rise as farmers rebuild confidence
Sheep and beef farmers are cautiously optimistic as farmgate prices continue to firm.
Conditions are in place for the start of a new dairy price cycle, says ASB senior rural economist, Nathan Penny.
A tighter global dairy supply and firming demand for milk products are setting the scene for further price rises
His comments came as Fonterra today lifted its forecast milk payout for 2018-19 season by 30c; from $6 to $6.30/kgMS range to $6.30 to $6.60/kgMS range.
Penny says the revision was at the top end of the bank’s expectations.
“For example, we had revised our own forecast up by a more modest 25 cents earlier this month.”
Penny notes that the revision reflects the tightening in dairy markets over the past three months.
Dairy auction prices have lifted 17.3% since Fonterra’s last update back in early December. Catalysts for the improvement include tighter global dairy supply and ongoing firmness in demand.
Supply growth is soft the EU and US, with supply outright falling Australia.
Meanwhile, it’s likely that recent hot weather means that NZ supply growth is past its peak, Penny adds.
“Global dairy stocks are also much lower than in previous years.
“EU intervention stocks had been a buffer against any supply tightness; however, now these stocks have been sold down, making dairy supply vulnerable to shocks. Indeed, our view is that the conditions are in place for the start of a new dairy price cycle.
“With that in mind along with Fonterra’s announcement today, we place our 2018/19 milk price forecast of $6.25/kgMS under review. Importantly, the cycle is priming the 2019/20 season as evidenced by our initial 2019/20 milk price forecast of $7.00/kgMS (set last week).”
Penny also noted that while the milk price was humming, Fonterra’s corporate performance continues to disappoint.
Fonterra has revised down its 2018/19 forecast earnings per share by 10 cents to 15-25 cents/share. Fonterra also announced that it will not pay an interim dividend this year. Using the midpoint of its forecast and Fonterra’s current 70% dividend policy implies a forecast dividend reduction of 7cents/share for the year, Penny says.
Kiwis are wasting less of their food than they were two years ago, and this has been enough to push New Zealand’s total household food waste bill lower, the 2025 Rabobank KiwiHarvest Food Waste survey has found.
OPINION: Sir Lockwood Smith has clearly and succinctly defined what academic freedom is all about, the boundaries around it and the responsibility that goes with this privilege.
DairyNZ says its plantain programme continues to deliver promising results, with new data confirming that modest levels of plantain in pastures reduce nitrogen leaching, offering farmers a practical, science-backed tool to meet environmental goals.
'Common sense' cuts to government red tape will make it easier for New Zealand to deliver safe food to more markets.
Balclutha farmer Renae Martin remembers the moment she fell in love with cows.
Academic freedom is a privilege and it's put at risk when people abuse it.
OPINION: Should cows in NZ be microchipped?
OPINION: Legislation being drafted to bring back the controversial trade of live animal exports by sea is getting stuck in the…