Conditions are in place for the start of a new dairy price cycle, says ASB senior rural economist, Nathan Penny.
Prices have fallen more than they normally do at this time of year but, given the record highs reached in the spring, prices are bottoming out at a healthy level, Penny notes in ASB Commodities Weekly report.
Looking ahead, ASB expects prices to peak in spring 2019 in the high $7/kg range.
“The underlying tight supply conditions that boosted last year’s prices look set to continue though weather and therefore feed availability remain swing factors as they normally are,” he says.
“If last year’s peak prices took out the gold medal, it follows that this spring may be in line for silver.”
Demand remains strong in the US and firm in China, but traditional markets like the UK and EU continue to lose importance.
“We will be keeping an eye on how Chinese demand holds up amid hints of a slowdown, with Beijing recently dropping its GDP growth target to 30-year low. But all up, we expect a second-successive season of healthy lamb returns.”