ASB’s milk forecast trimmed

ASB has trimmed its milk price forecast by 25c to $6.25c on the back of another fall in global dairy prices.

This week, prices dropped 0.3% and overall prices have now fallen in nine out of the last 10 auctions — down 15.9% over that period.

Individual product results were more mixed: key whole milk powder dipped 0.9% while milk fat prices were firm as butter prices rose 2.4%. Skim milk powder prices were unchanged.

The recent auction falls came as New Zealand production continued to show significant strength, ASB senior rural economist Nathan Penny said.

Seasontodate production was more than 5% ahead of the same time last season while Fonterra had lifted its forecast milk collections growth forecast from 1.3% to 3%.

Mr Penny noted Fonterra was losing market share and its collections forecasts tended to be on the conservative side.

ASB has doubled its 201819 production forecast from 2% to 4%. After three seasons of declining production, it was on track to set a record high.

Cashflows were positive and farmers were beginning to put the dairy downturn behind them. That meant they were spending more on maintaining pastures, through fertiliser application and on animal health. That spending was then translating into more production per cow.

Westpac senior economist Anne Boniface said farmers were ‘‘on high alert’’ for the prospect of El Nino conditions developing.