increase font size
Demand for milk in China is growing as the country’s economy improves following Covid.
A resurging Chinese economy is helping boost returns for New Zealand dairy farmers.
Two banks – BNZ and Westpac – are following Fonterra and lifting their forecast milk price for the season.
The positive sentiment among economists is reflecting on the Global Dairy Trade (GDT) auction. Last week’s event recorded a slight increase in dairy prices, GDT’s third consecutive price rise.
Westpac has lifted its forecast price by 50c to $7/kgMS, sitting above Fonterra’s new mid-point of $6.80/kgMS ($6.30 to $7.30 range).
Senior agri economist Nathan Penny says the forecast change is due to better than expected global dairy demand, especially from China.
Penny says the Chinese economy has rebounded strongly post Covid.
“The Chinese economy is on track to post modest growth over 2020, the only major global economy likely to do so.”
BNZ has lifted its forecast payout by 30c to $6.80/kgMS.
Senior economist Doug Steel attributes the recent GDT gains to improving demand from China.
“This has coincided with macroeconomic indicators suggesting that the Chinese consumer is starting to follow the country’s industrial recovery that has been evident for months,” he says.
“This is a good macro backdrop for the demand pickup to be sustained. At the same time, Chinese purchasing power has been improving with an appreciating Chinese yen.”
Apart from China, most countries are still dealing with Covid-19.
Earlier this year there were fears of a price slump as the global recession, triggered by Covid, weighed on global dairy demand.
But Penny says China and some other Asian dairy markets are faring better than expected.
“More broadly, New Zealand agricultural exports, including dairy, have proved more resilient than we expected earlier in the year. In this vein, we now expect global dairy prices to hold at or around current levels over the remainder of the season.
“This updated view contrasts with our previous view that prices would weaken as the global recession weighed on global dairy demand.
“The strength in demand has seen prices firm over three consecutive auctions. Importantly, this sets up the milk price well for the season as this price strength has coincided with the peak in spring production and similarly high auction volumes.”
ASB, which is sticking to its $6.75 forecast, also notes that downside risks to the forecast have receded.
Economist Nathaniel Keall says after three decent GDT auctions, there is now an upside risk.
Rabobank, which will update its milk forecast payout in December, is hinting of a rise.
RaboResearch senior dairy analyst Emma Higgins notes that Chinese buyers stepped back into the market more actively last GDT event following more quiet activity in the previous auction earlier this month, which coincided with Golden Week celebrations.
“This increased activity was reflected in the steady powder results, with Chinese demand noticeably higher for WMP compared to last month and also compared to this time last year,” she says.
“We forecast on a quarterly basis and we are set to revise our current $6.35/kgMS milk price in early December.
“If dairy prices remain resilient, ceteris paribus, we will be lifting our forecast.”
However, despite the positive outlook, some potential roadblocks remain.
Covid uncertainties are ongoing and developments on this front still have the ability to surprise, he adds.
Milk production continues to grow in most parts of the globe and this could tip the balance in favour of supply and impact prices.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.
OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.
Fonterra has delivered a fifth straight year of record organic milk price for farmer suppliers.
Fonterra says favourable weather conditions supporting pasture growth is boosting milk production.
Like many manufacturers around the world, European agricultural machinery and tractor manufacturers are currently operating in a difficult market environment. But they are heading to the world’s largest agricultural machinery event in Hanover next month with a degree of cautious optimism.
Established in 2021, the John Deere Technician of the Year Awards champion the important contribution parts and service technicians make to the Australian and New Zealand agriculture, construction and forestry industries.
Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.
New Zealand is closer to eradicating bovine TB than ever before, but possums remain a threat, says Beef + Lamb New Zealand.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
The ACT Party says media reports that global dairy giant Nestle has withdrawn from the Dairy Methane Action Alliance shows why New Zealand needs to rethink its approach to climate.
OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.
OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…
