NZX futures point to strong milk prices
Dry weather throughout much of the country has driven up milk futures prices to close to $7.00 a kg for next season.
The NZX milk futures contract — designed to help farmers mitigate the risks associated with variable milk prices — has been steadily rising since January, when the dry weather started to set in.
Fonterra has forecast milk collection to fall to 1510 million kg of milk solids for the current season due ongoing dry weather.
The co-op’s latest forecast is slightly above last season’s collections of 1505m kgMS — a season also impacted by poor onfarm conditions — and down from February’s forecast of 1530m kg.
The NZX’s September 2020 milk price contract last traded at $6.80/kg, up from around $6.00/kg in January.
“The fear is that this dry weather is going to roll into next season,” said Nigel Brunel, director of institutional commodities at OM Financial. He said the rally in the milk futures contract reflected the 22 per cent rise in the “grand daddy” of the New Zealand milk products — whole milk powder — since late last year. Futures market pricing pointed to another lift in prices at the next sale this Wednesday, he said, adding that at current levels of US$3400US$3500 a tonne, whole milk powder production was starting to look attractive for dairy producers abroad, he said.