Milk price predicted to hold up for new season
Farming leaders agree with bank economists that a largely unchanged milk price is likely when Fonterra announces its opening forecast for the 2018-19 dairy season in late May.
The milk price for the 2017-18 season is at $6.55 a kilogram of milk solids, a five cent lift from last year’s opening forecast of $6.50, announced last May.
ASB Bank has so far set its opening forecast at $6.50/kg. ANZ has taken a more conservative forecast, predicting an opening forecast of $6-$6.25/kg and commenting it would be ‘‘unusual’’ to have a milk price in the low-$6/kg range for three years.
Federated Farmers dairy chairman Chris Lewis predicted a range between $6.30-$6.70/kg, based on GlobalDairyTrade (GDT) and dairy futures prices of about US$3150-$3300/tonne.
In the last year commodity prices had ranged from US$2800$3300/t,
with the exchange rate being the big unknown factor.
‘‘Based off that in the last 12 months, it’s averaged just over
US$3000/t and in the next six months it’s looking it could be
US$3150-$3200/t. I’m guessing like everybody else because I don’t know what the US dollar is going to do.’’ If the mid-$6 forecast eventuates, it would be the first time since November 2016 it had stayed at $6 or higher. The stability would give farmers confidence to plan ahead, he said.
‘‘It also sends the right signals to the young people coming into farming, a few of who got a hammering when there was a
$4/kg payout.’’
BNZ in its latest Rural Wrap report lifted its forecast for next season to $6.10/kg, up from the
$5.70/kg it set in October last year. Westpac in its latest fortnightly agri-update forecasted an opening milk milk price of $6.50/kg.
During last week’s GDT auction dairy prices lifted by 2.7 per cent to reach an average of US$3587
($4888) per tonne. In the first price lift in four auctions, all product categories increased.