NZ Milk Price Could Hit $10/kgMS as Global Supply Eases
A 'tsunami' of milk from key exporting countries is winding down and this may be good news for New Zealand dairy farmers.
In a report released last week, the bank notes that a fourth consecutive season of strong milk pricing is anticipated for New Zealand dairy farmers in 2019-20.
For the current 2018-19 season, Rabobank says modest upside is anticipated to the farmgate milk price, with this now expected to lift to $6.65/kgMS.
In its seasonal outlook on New Zealand dairy, Fourth time lucky: Back in the black once more, Rabobank says stagnant global milk supply and robust global demand for Oceania-origin dairy products is expected to support strong milk prices for New Zealand farmers over the remainder of the current season and into the next.
Report author, Rabobank dairy analyst Emma Higgins, said higher global dairy commodity prices had been sustained by below-average milk production growth from key exporting regions.
“Climatic conditions from 2018 have plagued milk supplies in the EU, Australia and Argentina, while inadequate milk cheques for US producers have kept milk supply below historical averages,” she says.
“And these supply side factors will either take time or significantly higher prices to turn around.”
Higgins said the slow-down in global milk supply growth had led to a recent substantial rise in the pricing of Oceania-origin dairy product.
“From December 2018 through to early April 2019, commodity dairy prices have jumped 24%, with butter and skim milk powder the two products to shift the needle most significantly,” she said.
“We expect these strong global prices to hold in the short term, underpinning a rise in the current season forecast and a strong opening forecast for the 2019/20 season.”
Higgins said while a new season forecast with a “seven in front” would be warmly welcomed by farmers, they would be wise to factor in some input cost inflation and budget accordingly.
“As the milk price lifts so too does price inflation for on-farm purchases and expenditure for fixed costs such as electricity, feed and wages. Lower freight costs and weaker global benchmark prices for fertiliser may help to combat inflationary pressure, however, where possible, a focus on cost control is advised.”
