ANZ has revised down its farmgate milk price forecast for the 2023-24 season by 60 cents to $7.15 per kilogram of milksolids.
The new forecast is 15 cents above the $7.00 /kgMS mid-point of Fonterra’s recently revised price guidance of $6.25-$7.75 /kgMS.
The bank said its forecast for the 2022-23 season remains unchanged at $8.20 /kgMS.
It cited deteriorating economic conditions in China and the consequent easing of demand for dairy products.
“China is currently experiencing a period of deflation. Consumer confidence is weak, unemployment levels are rising, and the property sector is struggling,” ANZ said. Exports are also under pressure, it said.
There are also elevated levels of milk powder stocks in China. Consumption of liquid milk was curtailed during the lockdowns in late 2022, which meant the excess milk was dried.
The relatively weak New Zealand dollar continues to support the farmgate milk price but is “certainly not sufficient” to offset the impact of lower dairy commodity prices. ANZ expects some price recovery, but not until next year, by which time much of the current season’s production will already be sold.
Fonterra’s prudent approach to its own price forecast means dairy commodity prices could recede a little further without resulting in another review of the milk price estimate, ANZ said.