5 Nov 2014

Farmgate price forecast unchanged

2:10 pm on 5 November 2014

The farm-gate milk price forecast remains unchanged after the overnight Global Dairy Trade auction.

Dairy analysts, NZX Agri continues to forecast, for the 2014-15 season, $4.75 per kilo of milk solids.

This compared with Fonterra's current forecast of $5.30.

Susan Kilsby from NZX said results from the global dairy trade auction were disappointing, even though there was a slight increase in whole milk powder prices.

She said the snapshot farm-gate milk price, an indication that if the global dairy trade prices were achieved across the entire season, it would equate to $3.95 per kilo of milk solids, up five cents on the last auction.

"The outlook for dairy commodity prices is weaker than it was back in mid-October. We look at the NZX dairy futures market to see where the future direction is likely to go and that market is weaker than it was three weeks ago.

"So that has been offset by the weaker NZ dollar so it's really the dollar that has kept our price forecast at $4.75 so positive for farmers that we haven't pulled out forecast back further as we have been doing so in recent months but the outlook for for dairy commodity prices is still deteriorating.

"It's really because there is just so much milk all around the world I mean NZ is one of the culprits as well, we are at the peak of our season and we are certainly having a good production season here but it's not just us having good milk flows, it's also happening in Australia, the United States and Europe.

"The other side of the story is that the two biggest buyers of dairy products, being China and Russia just aren't buying the volumes they normally would be".

"Basically prices have to improve from where they are now to get back to that 4.75 level which of course is also well short of the 5.30 that Fonterra is currently forecasting.

"The way we see the market is that there's more and more pressure being put on that Fonterra forecast and our expectation is that they will have to reduce that at some point."