He says despite last week's price drop in the Global Dairy Trade (GDT) auction, the bank is sticking with its $10/kgMS forecast.
Whole milk powder prices fell 3.2%, while larger dips in butter and butter milk prices dragged the overall GDT index lower.
"Our view has always been based on the demand and supply fundamentals and on that front it's not clear much has changed yet," syas Keall.
"We'll want to see how things settle out after the Southern Hemisphere winter before adjusting our priors.
"And of course, don't forget prices are very, very high still in an outright sense, so even if there is a little downside risk to our forecast, 2022/23 is likely to be one of the strongest seasons on record."
Keall says they are still sceptical prices can fall very far in an environment where global milk supply is extremely tight.
"As we noted in our last report, European dairy production remains very weak and was decelerating further in the latest data.
"We suspect that the same constraints around high input costs and issues securing labour will hamper Southern Hemisphere producers as they step into the fray over spring. While global growth is slowing too and consumption won't be as flash as hoped, global dairy demand should be inelastic enough to keep prices well supported.
"That's particularly the case in China where achieving stability of food supply will be a high priority for policymakers ahead of this year's National Congress, where Xi Jinping will seek a third term as Paramount Leader."
Keall also notes that the NZ dollar has edged down too. As Fonterra finishes the remainder of its hedging for the season, the Kiwi's soft position still looks set to be a major boon, which was the other big driver of our recent forecast change, Keall adds.
Meanwhile Synlait Milk has increased its forecast base milk price forecast for the season to $9.50/kgMS.
The 50c lift reflects improved commodity prices, says chief executive Grant Watson.
"The forecasted lift in milk price reflects an improved outlook for 2022-23 dairy commodity prices, following the recent recovery in pricing, and the current strength of the US dollar," he says.
