$6-plus dairy payout tipped for next season
ARabobank dairy analyst believes strengthening international prices will result in a milk payout to dairy farmers next season ‘‘in the early $6/kgs’’.
Rural economist Emma Higgins told about 100 dairy farmers and dairy industry people in Manawatu that the recovery in dairy prices was likely to continue and result in a payout somewhere north of $6 a kilogram of milk solids.
‘‘At the moment whole milk powder prices at auction are above US$3000 [a tonne] and we expect them to stay next season in the US$3000 to US$3500 range.’’
She said dairy farmers had crawled their way out of a twoyear hole and were now able to reap the benefits of more stable world prices.
‘‘Recovery of prices is across the whole dairy complex - whole milk powder and butter fats, but skim milk powder is still at a low.’’
I don't think New Zealand will generate growth through more cows, but through better technology and better production as opposed to hooves on the ground. Emma Higgins
Higgins said skim milk powder had not recovered as Europe had warehouses full of it and their new season was about to start, implying there would be more banks of skim milk powder. She said there was 350,000 tonnes sitting in Europe now.
‘‘The gap between fats and skim milk powder is at a record. There is US$3000 between them.’’
Although a payout of $6.30/kg of milk solids was likely, farmers needed to be aware of potential overseas trends, said Higgins.
‘‘Europeans haven’t cut cow numbers, their lower yields have been responsible for lower production. And currencies could move.’’
But there were many positives and that was why dairy analysts around the world thought dairy prices would hold or go up slightly, she said.
‘‘I believe China has whittled down its inventory and will be back in the market. Macron is the president of France, not the Le Pen so the euro won’t fall.’’
She said while India was a standout for dairy growth, it remained a protectionist nation and tariffs were as high on New Zealand dairy products as 60 per cent.
That was unlikely to change as India wanted to protect its own farmers.
Higgins said new growth areas were Africa and Asia and Rabobank had revised its expectations of China sales remaining down as milks costs and slower growth were the new norms and would limit consumption.
With the global growth in the middle class, demand for dairying was growing by 20 billion litres.
‘‘That equates to the whole of New Zealand’s milk flow. I think we’re lucky if we can get another 2 billion litres. The rest of the growth will come from Europe’’.
Riders would remain on global dairy production, she said.
‘‘It might be catastrophic weather somewhere, or an outbreak of foot and mouth disease In China.’’
She said these factors would have a huge impact on the world prices.
In New Zealand interest in new milk conversions had ‘‘dried up’’ with the low payout. ‘‘Land and water is getting harder to find,’’ she said.
‘‘I don’t think New Zealand will generate growth through more cows, but through better technology and better production as opposed to hooves on the ground.’’
Higgins warned farmers volatility was here to stay.
‘‘The reality is we have come out of a deep trough. Expect more volatility as exchange rates fluctuate and demand and changes too as we have seen in the past.’’