Thursday, 17 December 2020 05:55

US Dollar will set pace

Written by  Sudesh Kissun
BNZ senior economist says the US dollar will determine milk payout. BNZ senior economist says the US dollar will determine milk payout.

The US currency will determine how the milk payout plays out, says BNZ senior economist Doug Steel.

He told Rural News that, in some ways, the recent GDT price strength looks like catch up due to the recent declines in the US dollar.

A lower US dollar tends to lift product prices that are denominated in that currency.

“Of course, the flipside of a lower US dollar is a higher NZ dollar, while a higher NZ dollar – in itself – tends to put downward pressure on milk price, it very much needs to be seen in the context of product price movements in offshore markets.

“These things do not move in isolation. It is the balance that matters.”

Steel points out that it was no coincidence that the 2013-14 record $8.40 milk price was paid when the NZD/USD was above 0.80.

“That said, a higher NZD/USD will limit the upside to domestic milk prices, but likely more so for next season than the current one.”

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