Chinese strategy
OPINION: Fonterra may have sold its dairy farms in China but the appetite for collaboration with the country remains strong.
ASB economist Nat Keall says there is plenty of uncertainty at this stage in the season.
"There are some upside risks as well as downside ones.
"Nonetheless, we think it is prudent for farmers to be budgeting on a milk price in the lower half of Fonterra's present guidance range."
ASB has lowered its forecast milk price to $6.60/kgMS.
Westpac is sticking to its $7.50/kgMS forecast, which was revised this earlier this month.
Westpac senior agri economist Nathan Penny says they had expected prices to continue to fall in the short term.
"Recall that global demand is weak, notably from our key market in China." However, the fall in last week's Global Dairy Trade (GDT) auction was larger than expected.
"And while it is difficult to read too much into one auction result, it does point to prices potentially falling by more than our updated forecast suggests," says Penny.
"To that end, Fonterra's forecast range is a useful tool to keep in mind.
"After Fonterra's recent update, the range stands at $6.25 to $7.75.
"Indeed, we continue to note that it's still early days in the season and a wide range of milk prices are possible," says Penny.
