Farmgate prices rise as farmers rebuild confidence
Sheep and beef farmers are cautiously optimistic as farmgate prices continue to firm.
The GlobalDairyTrade price index lifted by 1.9% at the auction held overnight.
Whole milk powder was up 1.8% to an average price of US$2,304/MT and skim milk powder was up 0.2% to an average price of US$1,891/MT.
ASB's Nathan Penny says the lift was well below expectations of a 10% rise.
Although the bank is sticking to it $4.60/kgMS milk price forecast – Fonterra's current forecast - the downside risk to this has grown, he says.
Butter and anhydrous milk fat posted the largest gains of 9.0% and 6.1%, respectively. Meanwhile, butter milk powder and casein posted similar-sized falls.
"The modest rise comes despite Fonterra's lower auction volumes," Penny says. "Ahead of the auction, Fonterra lowered the amount of WMP offered by 5% from what it had signalled previously.
"Moreover, Fonterra also lowered the amount of WMP it plans to offer over the rest of the season by 9%.
"Our view remains that dairy prices will move higher over 2016. NZ production is falling hard (we estimate that production is down around 3% in the season to November compared to the same period last season) and a large hole is developing in global dairy exports, particularly for whole milk powder (WMP)."
Many farmers around the country are taking advantage of the high dairy payout to get maximum production out of their cows.
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