Christel Yardley / Tips
Dairy product prices have trended higher this season, supporting the outlook for farmers, according to ANZ.
ANZ has raised its expectations for the Fonterra farm milk price this season as dairy prices rise.
The bank’s agricultural economist, Susan Kilsby, on Thursday raised his forecast from 50 cents to $ 8.20 per kilogram of milk solids.
“The prices of dairy products have increased as the season has gone on. A lot of times the prices weaken at this time of the season, but this season the prices have firmed up quite a bit, ”Kilsby said.
“While we don’t expect these prices to rise further immediately, they are now at a level that is providing a healthy return to our farmers. “
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Economists have mostly upped their expectations for Fonterra’s milk payments over the past month, as limited milk volumes support high global prices, while the New Zealand dollar remains in check.
Most now expect payments above the midpoint of $ 8 per kgMS of Fonterra’s milk price direction of $ 7.25 per kgMS to $ 8.75 per kgMS.
Westpac raised its forecast on Wednesday to $ 8.50 per kgMS, which would surpass Fonterra’s previous record of $ 8.40 per kgMS. ASB last month raised its forecast to $ 8.20 per kgMS and BNZ increased its forecast to $ 8.30 per kgMS.
In contrast, Rabobank lowered its forecast last month to $ 7.80 per kgMS, citing high stock levels in China. Import volumes into China had to slow or fall to rebalance the market, the bank said.
Fonterra takes the levels of fat and protein in milk into account when purchasing it from farmers.
ANZ’s Kilsby said dairy markets are currently relatively balanced, keeping prices stable.
However, she said global demand for dairy products was fragile as Asian economies suffered from the pandemic and spreading contagion due to an impending slowdown in China’s real estate development industry.
Kilsby noted that global milk supplies were increasing only slowly and that high grain costs were limiting production in the northern hemisphere.
“Whatever supply growth occurs, it is usually absorbed in the country of production, which means that we are not seeing an increase in the volume of dairy products offered on world markets,” he said. she declared. “This situation is unlikely to change anytime soon. “
The New Zealand dollar had not appreciated as quickly as the ANZ had expected, and much of Fonterra’s foreign exchange needs would now be covered for the current season, reducing the risk of a New Zealand dollar. The stronger Zealander is eroding farm income considerably, she said.
Fonterra paid its farmer suppliers $ 7.54 per kgMS last season.