Better days ahead for dairy
Dairy farmers struggling to breakeven can expect better prospects next season.
The farmgate milk price could possibly rise beyond $7/kgMS in the 2019-20 season.
That's the message from BNZ senior economist Doug Steel following the seventh consecutive GDT Event price index gain last week.
But he remains wary of demand, given slowing global and Chinese growth indicators.
But ASB’s Nathan Penny is sticking with his bullish $7/kgMS forecast for next season after the price index climbed 3.3% last week.
Steel told Dairy News last week’s overall gain was underpinned by a chunky 6% lift in whole milk powder (WMP). The price index has made a cumulative 23.8% gain since November last year.
“Tight global supply (including slowing late season NZ milk production) is providing support to prices,” Steel says.
“EU milk production has been flat and stockpiles unwound, while Australian milk production is well down on a year ago. Meanwhile, demand looks strong with unsatisfied bidders at this auction well above average at 67.”
If prices were to hold their recent gains the 2018-19 milk price would come in close to the mid-point of Fonterra’s newly minted forecast range of $6.30 to $6.60/kgMS, Steel says. This adds to the upside possibility of BNZ’s $6.25/kgMS forecast.
It is the first auction where WMP prices have pushed materially above the Reserve Bank’s medium view of US$3000/tonne, with last week’s prices reaching US$3186/t, he says.
Currently BNZ’s forecast for next season stands at $6.10/kgMS but there is a clear upside possibility. Current market conditions are consistent with a 2019-20 milk price of $6.70/kgMS but it could push above $7/kgMS. But aside from slowing demand indicators there is also a chance that global milk production might improve as grain prices weaken, he says.
Rabobank dairy analyst Emma Higgins says the total SMP volumes on offer for last week’s GDT Event (6255t) was significantly higher than the prior event in February 2019 – over 40% more.
“This highlights the extra milk New Zealand farmers have been pumping out this season and is highlighted further when considering the SMP volumes for this event were up 112% on the first March event last year.”
These factors contributed to the decline in SMP pricing of 4.3% last week.
“On the other hand, the average WMP leapt 6% to land at US$3186/t. The volumes on offer were less than the prior auction (-8%) but still significantly higher than last year (+35%). WMP demand is robust at present and this is a very strong result seeing as milk continues to flow (albeit heat impacted in recent weeks) and product volumes are plentiful.
“As we move closer to the northern hemisphere spring flush, buyers will be turning their eyes towards how the season is shaping up there,” she says.
“More milk will likely be available from Ireland given that last year weather challenges hampered production.
“But France and Germany are still lagging behind their prior year milk collections. Weekly collections through to February 10 suggested Germany was 0.6% lower and France 3% below the prior year.”
Analysis by Dunedin-based Techion New Zealand shows the cost of undetected drench resistance in sheep has exploded to an estimated $98 million a year.
Shipping disruption caused by Houthi rebels in the Red Sea has so far not impacted fertiliser prices or supply on farm.
The opportunity to spend more time on farm while providing a dedicated service for shareholders attracted new environmental manager Ben Howden to work for Waimakariri Irrigation Limited (WIL).
Federated Farmers claims that the Otago Regional Council is charging ahead unnecessarily with piling more regulation on rural communities.
Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.
OPINION: We have good friends from way back who had lived in one of our major cities for many years.
OPINION: European farmers are going to extreme lengths to have their message heard.
OPINION: The hustle and bustle of one of Bangkok's most popular fast food outlets may feel a world away from…