Wednesday, July 6, 2022

Stunning milk price forecast

Fonterra has announced a stunning milk price forecast of $7/kilogram milksolids (kgMS) for the 2013/14 season.  This is a record opening milk price for the company.    


The forecast has been accompanied by a generous advance schedule which will see suppliers initially receive $5 for each kgMS produced through to December.  In the latter part of the season the advance rate schedule is forecast to increase with suppliers eventually being paid out the full milk price of $7/kgMS for all milk supplied during the season by October 2014.  These forecast rates are subject to change except for those suppliers that elect to join the Guaranteed Milk Price (GMP) scheme.   GMP is designed to provide milk price certainty for suppliers.  In the 2013/14 season Fonterra will trial the system with a limited number of suppliers.  Suppliers have until 21 June to apply to join this scheme and allocations will be made by the end of June.  The $7 milk price should certainly be sufficient to attract plenty of interest in the scheme.  


Westland has also matched Fonterra’s 2013/14 forecast of $7/kgMS.  Westland has also confirmed a forecast payout for the 2012/13 of $6 to $6.30/kgMS.  This payout forecast excludes retentions.  


Fonterra is sticking with its $5.80 milk price forecast for the current dairying season.  This is very close to the Agrifax 2012/13 milk price forecast of $5.85/kgMS which is also unchanged from a month ago.  Dairy commodity markets have reacted as expected with prices easing in-line with our expectations.


Looking out to the 2013/14 dairying season we have taken a slightly more conservative stance than Fonterra.  The Agrifax milk price forecast for the coming season has been revised upwards to $6.80/kgMS.  This is a 25c increase from our forecast a month ago.  Expectations of a weaker NZ dollar than previously forecast, is the main driver of the upwards revision of our milk price forecast.  


By 2014/15 season we expect a substantially weaker New Zealand currency but this is expected to be offset by dairy commodity prices returning to a more “normal” range.  This results in a milk price forecast of $6.85/kgMS

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