Pay­out fore­casts heed auc­tion rise

Matamata Chronicle - - Rural Delivery - By GER­ARD HUTCHING

ASB and West­pac econ­o­mists pre­dict that dairy farm­ers’ milk pay­out will lift to $5 per kilo­gram of milk solids for the sea­son.

But Fed­er­ated Farm­ers dairy pres­i­dent An­drew Hog­gard said he won’t be count­ing his chick­ens un­til they’ve hatched.

‘‘It’s [the overnight price rises] a pos­i­tive sign, but it’s like wait­ing for the rain which hasn’t ar­rived yet. We should plan for what we have in front of us,’’ Hog­gard said.

The trade-weighted GDT price in­dex hit a five-year low in De­cem­ber, but has now lifted at the last five fort­nightly auc­tions. Af­ter last Tues­day’s auc­tion it is now at its high­est level since July.

Hog­gard re­called Fon­terra chief ex­ec­u­tive Theo Spier­ings say­ing in De­cem­ber that if the price lifted to US$3500 (NZ$4653) a tonne for whole milk pow­der by March, that a $5.30kg/ms pay­out would be ‘‘achiev­able’’. The lat­est price is US$3366 a tonne.

At the last two global dairy auc­tions the price of whole milk pow­der jumped by 35.6 per cent. Whole milk pow­der is New Zealand’s largest dairy ex­port prod­uct.

Fon­terra’s present pay­out fore­cast is $4.70kg/ms, set in early De­cem­ber.

For the 2015-16 sea­son, the ASB is pre­dict­ing a 50c in­crease in its own pre­dic­tion, from $6 to $6.50 kg/ms.

Whole milk pow­der per­formed strongly at last Tues­day’s auc­tion, up 13.7 per cent, while ched­dar prices jumped 16.8 per cent.

All cat­e­gories saw price in­creases, with an­hy­drous milk fat up 6.4 per cent, skim milk pow­der up 5.7 per cent, but­ter milk pow­der up 1.9 per cent, ren­net ca­sein up 1.2 per cent, and but­ter up 1.1 per cent.

De­spite in­creased prices, vol­umes con­tin­ued to fall with 22,957 tonnes sold, down sharply from 28,705 tonnes at the pre­vi­ous auc­tion.

Econ­o­mist Nathan Penny said global dairy mar­kets re­mained very sen­si­tive to changes in New Zealand milk sup­ply.

He said the rise in prices came at the cost of the drought, and meant pro­duc­tion would not in­crease this sea­son, as had been ear­lier pre­dicted.

Auc­tion vol­umes had fallen 27 per cent from two auc­tions ago, and Fon­terra has pre­dicted a lower fore­cast sup­ply of 20 per cent for the next 12 months.

West­pac econ­o­mist Michael Gor­don said there were in­di­ca­tions that Chi­nese de­mand was ‘‘nor­mal­is­ing’’ af­ter over­stock­ing.

He said Fon­terra was ex­pected to hold a board meet­ing in late Fe­bru­ary/ early March, and an up­date on the milk price fore­cast ‘‘could fol­low’’.

Con Wil­liams, an econ­o­mist with ANZ, said farm­ers ‘‘won’t be go­ing out pop­ping the cham­pagne as the ma­jor rea­son for the turn in prices is drought in cer­tain re­gions and the low farm-gate price re­strict­ing the use of sup­ple­men­tary feed’’.

Fol­low­ing the auc­tion, AgriHQ lifted its Sea­sonal Far­m­gate Milk Price fore­cast for the 2014-15 sea­son by 15 cents a kilo­gram of milk solids to $4.70/kg, the same as Fon­terra’s fore­cast.

AgriHQ dairy an­a­lyst Su­san Kilsby said Fon­terra’s milk price fore­cast for this sea­son now looked achiev­able.

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