Open Country lifts milk forecast

The country’s second biggest milk processor, Open Country Dairy, has lifted its milk price forecast, reflecting a more positive outlook for international commodity prices.

Its forecast for the 2016-2017 season is now in a range of $4.60-$4.90 a kilogram of milksolids, up from $4.25-$4.45.

But the privately-owned dairy company has warned its farmersuppliers there is still a risk the improvement in global dairy prices is a blip, not a trend. The industry and farmers are cautious about a 31 per cent lift in average prices in the last three Global Dairy Trade auctions because there was a similar lift pattern early last year then prices dived again. This is dairy farming’s third year of a below break-even milk prices.

In a letter to Open Country farmers, the company said while market indications are more positive than last season due to contracting global milk supply, the risk remains of European farmers responding to the brighter milk prices by increasing their milk production again.

Another concern was the challenge of low oil prices which key dairy importing countries relied on for purchasing power. Oil was still at US$45 a barrel compared with the US$100 it was fetching between 2010 and 2014, the company said. The strength of the New Zealand dollar against the US greenback was also negating some of the benefits of the recent price rises.

Industry leader Fonterra recently upgraded its milk price forecast for this season to $4.75.