Thursday, 17 December 2020 11:55

Is another $7.14 payout on the cards?

Written by  Sudesh Kissun
Fonterra chief executive Miles Hurrell says China is continuing to recover well and this is reflected in the recent Global Dairy Trade (GDT) auctions. Fonterra chief executive Miles Hurrell says China is continuing to recover well and this is reflected in the recent Global Dairy Trade (GDT) auctions.

This season's farmgate milk price could match last season’s $7.14/kgMS payout, despite the carnage caused by Covid-19.

BNZ senior economist Doug Steel told Rural News that this would be a remarkable achievement.

“Dairy prices have firmed up in recent months, six months ago there were dire forecasts,” he says.

“If global prices maintain recent strength, our calculations suggest this season’s milk price will be close to last season’s $7.14.”

BNZ is forecasting a milk payout of $7/kgMS for the 2020-21 season. Last month Fonterra lifted its milk payout midpoint range by 20c to $7.

 Fonterra chief executive Miles Hurrell says China is continuing to recover well from Covid-19 and this is reflected in recent Global Dairy Trade (GDT) auctions.

Hurrell noted strong demand from Chinese buyers, especially for whole milk powder, a key driver of the milk price.

Steel says that New Zealand farmers enter the second half of the dairy season with less trepidation than at the start of the season in June.

“The economic bounce back from the initial Covid restrictions around the world has been stronger than many predicted.

“This, including Asia doing better than elsewhere, has set a better backdrop for dairy demand.”

GDT prices have increased about 12% since the start of the season.

Covid vaccine hopes have also buoyed risk appetite and the prospect of better medium-term economic conditions, Steel says.

“It brings the potential for better dairy demand and prices ahead.

“There are already signs of this demand with the number of unsatisfied bidders in the early-December GDT auction reaching its highest level since April 2019.”

However, Covid remains the biggest threat with many countries still struggling to contain the virus. The food service sector, including restaurants and bars are struggling to remain open under government-imposed restrictions.

There are also geopolitical risks and trade tensions simmer.

Steel says the supply side is important too.

“Global milk supply has been growing, but not excessively so,” he says.

“NZ milk production in October was only 0.3% higher than a year ago, a marked slowing as some areas got a bit dry after what was a strong start to the season.

“To the extent that this slowdown has helped support prices recently, it may not last long, as recent rain should see NZ milk production comparisons to a year earlier improve somewhat ahead.”

BNZ is forecasting milk production for the entire season to be “a touch over 1%” over last year.

More like this

No fooling around

OPINION: The non-performing China Farms have always been a source of headaches for Fonterra.

China farms finally sold

After years of losses, Fonterra's two wholly owned China farming hubs in Ying and Yutian have been sold.

More grass, more milk

Fonterra collected more milk in February thanks to better pasture growth in most parts of the country.

Tanker drivers roped in for fundraiser

Fonterra's Pahiatua and Longburn based tanker operators have proven the benefits of pulling together - quite literally - by hauling their trucks by hand for charity.

National

Machinery & Products

SIAFD wins punters' plaudits

After celebrating its 70th year last month, it looks like the South Island Agricultural Field Days (SIAFD) has hit its…

Opens up blindspots

Traditionally blind spots caused by large buckets or front mounted loads on wheeled loaders have been a major safety concern.

She's one big feeder

Feeder specialists Hustler has released a maxi-sized multi-feeder aimed at large scale farms in New Zealand and further afield.

Roots out problems

Austrian manufacturer Pöttinger has introduced the new Durastar narrow share for its Synkro and Synkro-T, mounted stubble cultivators.

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Blue murder

OPINION: Your old mate recently read an off-the-wall suggestion, by some boffin, that deliberately staining meat blue will lead to…

Foot in mouth - again!

OPINION: This old mutt reckons Agriculture Minister Damien O'Connor too often suffers from 'foot in mouth' disease.

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter