Tuesday, 28 June 2022 09:55

Prices to remain high

Written by  Sudesh Kissun
Westpac senior agricultural economist Nathan Penny. Westpac senior agricultural economist Nathan Penny.

Westpac senior agricultural economist Nathan Penny expects prices to remain elevated as global supply remains very tight.

However, the bank is sticking to its forecast milk price of $9.25/kgMS for this season.

Penny says, at some stage, they anticipate that Covid restrictions in China will ease further and take dairy demand higher as a result.

"At that time, global dairy prices are likely to get a further boost."

However, he says last week's Global Dairy Trade auction result is consistent with its current forecast.

Fonterra has a wide ranging forecast milk for the season - $8.25/kgMS to $9.75/kgMS.

Penny notes that the mixed nature of the result suggests prices are in a holding pattern.

"At the last auction the market factored in better Covid news in terms of easing restrictions in China.

"But with no fresh news to digest on that front, the price moves reflected changes in product mix rather than any underlying factors."

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