17 Jun 2020

Dairy industry better than expected but still facing uncertainty

12:45 pm on 17 June 2020

Despite a positive result at the Global Dairy Auction overnight, analysts warn Covid-19 is still presenting plenty of uncertainty for the sector.

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Photo: RNZ/Carol Stiles

At the latest auction prices lifted 1.9 percent to $US2979 a tonne. This is the third consecutive auction where prices have lifted.

Rabobank dairy analyst Tom Bailey said many countries were finding their economies in better shape than expected as markets reopened.

However, he said the bumpy ride that had been experienced since the coronavirus pandemic began may continue for some time yet.

He said that mere hours after the close of auction event, Beijing announced that a recent Covid-19 outbreak had pushed them to increase their Covid-19 restrictions to level 2, which includes the closure of schools.

"Going forward, a degree of uncertainty remains in the market. Today it seems that coronavirus is mostly winding down. However, the recent outbreak in Beijing is a reminder that the dust has not settled, just yet," Bailey said.

ASB Commodities Weekly report said the price gains this week were another step in the right direction for the 2020/21 dairy season, but it too remained cautious about the outlook.

"Fonterra's wide forecast [farmgate milk price] range of $5.40-$6.90 is understandable in this environment, and as we saw last week with oil, commodity prices can move fast in an uncertain economic environment," the report said.

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