Tuesday, 03 September 2024 07:55

$9 milk price on the cards?

Written by  Sudesh Kissun
ANZ agriculture economist Susan Kilsby says prices are trending higher as buyers realise that there will not be a massive surplus of milk. ANZ agriculture economist Susan Kilsby says prices are trending higher as buyers realise that there will not be a massive surplus of milk.

Growing global demand for dairy products and a flat milk supply could be setting the stage for a near-record farm gate milk price this season.

While it's early days - there's nine months left in the 2024-25 season - ANZ has lifted its forecast milk price to $9/kgMS. If this forecast comes to fruition, it will be the second highest milk price on record.

Federated Farmers dairy chair Richard McIntyre says a milk price of $9 would be a huge boost for farmers.

He told Dairy News that the last few years have been "pretty tight" on farm.

"There will be a long 'wish list' of things like plant replacement, environmental projects and debt repayments that farmers will happily sink any additional milk price into.

"That said, it's still early day and a lot can change between now and next September when the final milk price is announced."

ANZ agriculture economist Susan Kilsby notes that dairy commodity prices have trended higher in recent months as buyers have become more aware that there will not be a massive surplus of milk produced this season.

The major dairy-exporting countries are expected to produce a similar amount of milk this season to the previous season.

Meanwhile, demand for dairy products is continuing to steadily grow with the net impact is the firming of prices on Global Dairy Trade auction.

However, Kilsby has a word of caution - there is likely to be significant volatility in prices as the season progresses.

"If a $9/kgMS milk price is achieved this season it will be the second-highest milk price on record," she says.

"The previous record was the 2021-22 season milk price of $9.30/kgMS."

Fonterra is also optimistic about the season's farm gate milk price, lifting its mid-point by 50c to $8.50/kgMS last month.

The co-op strong balance sheet also allows it to lift the season's advance rate schedule by 10% from December. It's earnings is now forecast to be at the top end of the announced range of 60-70 cents per share.

Fonterra chief executive Miles Hurrell says the announcements reflect the recent lift in GDT prices as well as the strength of the co-op's balance sheet.

"Since announcing our opening financial year 25 season forecast farmgate milk price in May, GDT prices have improved. We've reflected this in our revised forecast range, with our midpoint lifting 50 cents to $8.50 per kgMS."

"It's still early in the season, with a relatively small proportion of our sales book contracted, so we are maintaining a wide forecast range," says Hurrell.

The co-op's new forecast range is $7.75-$9.25/kgMS, up from $7.25-$8.75/kgMS.

"We're also pleased to be announcing an uplift in our Advance Rate payment schedule, which will see farmers paid more for their milk earlier in the season," Hurrell says.

"Our balance sheet strength has allowed us to make several enhancements to the Advance Rate schedule over the last two seasons."

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