Thursday, 17 June 2021 09:55

Everything looks like going up!

Written by  Content supplied by Rabobank


Global dairy spot markets, for the most part, have been stuck in neutral through May.

Oceania origin commodity prices were mostly flat in the quarter, excluding a correction in the butterfat markets. Further upside cannot be ruled out, but the peak is near.

An expected softening of Chinese import demand should be enough to trigger a price correction in the dairy complex that is likely to occur in the later stages of 2021.

The European flush has largely been lacklustre. However, US milk production remains in high gear, and Australia has positive milk production flows for the season to date.

The settings remain in place for healthy profit margins for New Zealand's dairy farmers again in 2021/22 with Fonterra's opening mid-point farmgate milk price forecast of NZ$8.00/kgMS.

Other companies are largely in line with a similar forecast price, ensuring strong cashflows over the winter period.


RaboResearch expects farmgate prices to lift over June, with the reduced competition from Australis and a hot US market will help to lift the pricing floor.

However, the stronger currency and increased production are limiting the impact of these external pressures.

Farmgate price movements moved north over May 2021. As at the end of May, the North Island bull price was NZ$5.25/kg cwt, with the South Island bull price sitting fractionally lower at NZ$4.70/kg cwt. Higher prices are being driven by the imported beef price mixed with some local procurement pressure.


We expect the continued demand from key markets as we move closer to winter months here in New Zealand, helping to see prices lift through June 2021.

Farmgate prices have seen a jump over May, in line with seasonally tightening of product availability.

As of the end of May 2021, prices in the North Island averaged NZ$7.70/kg cwt, while South Island lamb averaged NZ$7.45/kg cwt, both lifting 12% compared to the same week last year.

Demand for sheepmeat from key markets continues to remain robust. New Zealand shipments of lamb to China were 16% higher in April 2021 compared to the year prior, which was impacted by the early stages of Covid 19.

Export volumes for April 2021 were 28% higher when compared to the three year average export volumes to China, highlighting the strength in the Chinese market. New Zealand shipments of lamb to the US were similarly strong for April, with exports +41% higher on 2019 volumes.


NIWA is forecasting above-average temperatures for most of the South Island across the winter months. The North Island is equally likely to receive above-average or near-average temperatures over the coming three months.

Rainfall levels are anticipated by NIWA to be near-normal for the top of the North Island, and the north and east coast of the South Island. The east of the North Island is likely to receive either near normal or above-normal rainfall. The west of both Islands are likely to receive below-normal or near-normal rainfall levels through the winter period 2021.

NIWA is forecasting near-normal or below-normal soil moisture levels in both the north and east of the North Island, as well as most of the South Island. The rest of country is forecast to have near-normal soil moisture levels through to August 2021.

Exchange rate

The NZ$ rose almost 1 cent against the US dollar in May and was trading at USc 72.5 on June 2.

While the US Federal Reserve believes that the current inflation evident in its market is transitory and warrants no action, the Reserve Bank of NZ is pushing the other way.

Encouraged by falling unemployment and rising commodity prices, in late May the RBNZ flagged that their first hike is likely to be in 2H 2022.

All being well, they hope to be well into a normalising cycle by the end of next year, and to have hiked six times by the end of 2024. Rabobank expects that the divergence of expectations for rates in the two countries will see the NZ$ hit US74 within six months.

More like this

Bank helps clients reduce emissions

Rabobank says climate change creates both risks and opportunities for the bank and its clients and that the food and agriculture sector needs to recognise the potential for both.

Editorial: Farm salaries get a boost

OPINION: The recent Federated Farmers / Rabobank 2024 Farming Salaries Report revealed strong growth in farm salaries over the past two years.


Viability of farming questioned

People are starting to question the viability of sheep and beef farming as profitability in that sector falls to one of its all-time lows, according to Federated Farmers board member and Gisborne sheep and beef farm, Toby Williams.

Zespri's net profit down $60m

Kiwifruit exporter and marketer Zespri has reported a $60 million drop in net profit, mainly driven by reduced licence revenue from lower pricing per hectare than 2022/23.

UAE FTA welcome news

The dairy and red meat sectors have welcomed news that New Zealand will begin formal negotiations for a free trade agreement (FTA) with the United Arab Emirates (UAE).


Flock House and its secrets

Plans are in place to celebrate the 100th anniversary of the legendary Flock House opening its doors for the first…

$160 billion cargo shipment deal

New Zealand’s major primary industry exporters have secured shipping capability to export $160 billion worth of products over the next…

Play by the rules

Trade and Agriculture Minister Todd McClay says the Government is always working to ensure that our food exporters are treated…

Machinery & Products

GPS in control

In a move that will make harvesting operations easier, particularly in odd-shaped paddocks, Kuhn has announced that GPS section control…

» Latest Print Issues Online

The Hound

True colours

OPINION: The watermelon party (AKA the Greens) try to portray themselves as an upright, self-righteous, caring bunch of woke, bicycle-riding…

Peace at last?

OPINION: Good news for hunters as Forest & Bird have "paused" legal action against the Fiordland Wapiti Foundation and agreed…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter