$9.20 milk price forecast!
ASB has become the first bank to forecast a milk price above $9/kgMS for this season.
Havoc wreaked in parts of China by Covid is being blamed for the latest drop in whole milk powder (WMP) prices.
Major disruptions to Chinese supply chains following the lockdown in Shanghai is leading to local dairy production being redirected away from fresh milk into less perishable powders.
Chinese authorities last week extended a lockdown in Shanghai to cover all of the financial centre's 26 million people - a major test of China's zero-tolerance strategy to eliminate the coronavirus.
ASB economist Nat Keall says this means the Chinese WMP market is now well supplied.
But he points out that the current dynamic in China isn't likely to be permanent, which is a positive for NZ dairy producers.
Dairy prices in last week's Global Dairy Trade (GDT) fell, with the price index down 1%. However, WMP prices dropped 1.5% to US$4,532/metric tonne.
Skim milk powder rose 1% to US$4,599/MT, cheddar rose 2.7% and butter dipped 0.6%.
Keall says the latest GDT result highlights the drop in WMP prices, but it seems buyers don't expect the glut to last.
"The contract curve is looking unexciting over the near term - albeit at a still healthy US$4,400/MT - but there's a sharp kink at contract number 5, which suggests prices still have quite a bit of momentum and there's an eagerness to secure supply once the near term WMP glut subsides," he told Rural News.
Looking further ahead, Keall says that Chinese economic growth is set to slow over the course of the year, but dairy's status as a staple food means demand isn't all that elastic.
He says dairy demand is a global story: buying activity from South East Asia and the Middle East is also acting as a support.
ASB economist Nat Keall. |
At the same time, global dairy production is still looking very weak.
Keall says the latest production data in both the US and Australia is poor - down 6.1% and 0.3% year-on-year respectively.
Things aren't that flash in NZ either, with drought conditions stretching into the spring now.
"To sum up all of those threads: don't expect recent reticence for NZ product from Chinese buyers to last," Keall explains. "While demand is set to ease a bit over the year, that tight supply picture should keep prices well supported."
He says ASB is retaining its lofty milk prices forecast for this season ($9.50/kgMS) and also next season ($9.20/kgMS).
Prime Minister Christopher Luxon will be fronting farmers at three large public meetings organised by Federated Farmers over the coming weeks.
Federated Farmers and a major Australian-owned bank are at loggerheads over emissions reduction targets set for New Zealand farmer clients.
More locally grown tomatoes are coming to stores this month and you can thank New Zealand greenhouses for that.
Changing skill demands and new job opportunities in the primary sector have prompted Massey University to create a new degree course and add a significant major into another in 2025.
It was bringing in a new Canterbury A&P Association (CAPA) show board, more in tune with the CAPA general committee, that has ensured that Christchurch will have a show this year, says CAPA general committee president Bryce Murray.
OPINION: Hats off to our pipfruit sector.
OPINION: Was the ASB Economic Weekly throwing shade on Reserve Bank governor Adrian Orr when reporting on his speech in…
OPINION: A reader recently had a shot at the various armchair critics that she judged to be more than a…