Sunday, December 3, 2023

Firm milk price still expected

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Fonterra should be able to narrow its farmgate milk price forecast range for the 2020 season around a healthy $7/kg milksolids if the latest Global Dairy Trade results are a guide.
The NZX forecast has a range of $9.42-$10.04/kg MS.
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An updated forecast will be provided along with the 2019 annual results on Thursday, September 26.

The GDT market index rose 2% on September 18 and the all-important whole milk powder category rose 1.9% overall to sit at US$3133/tonne.

Most analysts agree $3000-plus WMP prices should deliver a $7 milk price.

NZX analyst Robert Gibson said the GDT auction results and subsequent movements on the dairy futures exchange boosted his milk price model by 23c to $7.04.

The spot price prediction rose 14c to $7.63, which is an extension of the latest GDT price over the whole season at the current exchange rate.

The September 2020 milk price futures contract rose 2c to $6.82.

ASB senior rural economist Nathan Penny said the GDT result underpins his milk price forecast of $7 though it is still early in the season.

Chinese demand is resilient despite the trade war with the United States and the ASB expects dairy markets will remain relatively stable this season despite global headwinds.

“The Chinese household sector is growing faster than the rest of the Chinese economy while food purchases, including for most dairy products, are less susceptible to general economic slowdowns,” he said.

Westpac analyst Imre Speizer said all major dairy products recorded price gains in the GDT with skim milk powder up 3.4%, butter up 2.7% and anhydrous milk fat up 0.6%, along with the WMP gain.

North Asian buyers, mainly Chinese, accounted for more than half of the sales.

“We continue to expect a further loss in momentum in China’s economy into year-end, which should constrain demand somewhat. 

“However, over the longer term its pro-active responses to recent adversities via monetary policy stimulus, export diversification and efficiency gains should pay dividends.”

Speizer confirmed the more-pessimistic Westpac forecast at $6.50.

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