$8.40 milk price comes with warning

RABOBANK is forecasting an opening milk price of $8.40 a kilo of milk solids for the next dairy season — but it is warning the global dairy price recovery is going to be slower than expected.

In its Q2 Global Dairy Quarterly report, Rabobank said demand remained down but milk production was also down, which should result in an improvement in milk prices for dairy producers in most regions around the world.

Senior agricultural analyst Emma Higgins said low profitability over the past 12 months had led to a decrease in dairy herds in key regions such as the US and South America, while weatherrelated issues had also affected milk output in recent weeks, with diminished rains in New Zealand and excess rains in Europe.

‘‘This subdued global milk supply growth should help underpin a continuation of the dairy market recovery and an improvement in milk prices for dairy producers in most regions around the world.’’

While this was the case, the recovery would not be smooth, she warned.

‘‘Global demand recovery signals are mixed, and consumers’ purchasing power remains under pressure.

‘‘Although unemployment remains close to recordlow levels in most large markets, consumer sentiment is gloomier than anticipated. Inflation remains above target in most countries and high interest rates continue to put pressure on debts and consumer spending at a time when credit plays an important role after cumulative inflation in recent years.’’

Increased dairy production major headwind for NZ dairy sector

Milk output in New Zealand’s key market China had been

revised up for 2024 from 2% to 3.2%, Ms Higgins said.

‘‘This reflects higherthananticipated output due to the lagging effect from the last round of dairy expansions during 20192022.

‘‘In light of these factors, the bank’s view was that the current recovery in dairy market prices would now be slower than anticipated in its quarter 1 report.’’

The expectation Chinese milk production would grow at a quicker rate was a particular

challenge to Rabobank’s milkprice forecast for the upcoming New Zealand dairy season. ‘‘Chinese production figures are especially significant for New Zealand’s dairy sector given their influence on Chinese import requirements and the fact more than 30% of this country’s dairy exports head to the Chinese market.

‘‘And we do see this increase in Chinese milk output as a downside risk factor to the New Zealand farmgate milk price.’’ — RNZ