In an update yesterday, senior economist Michael Gordon said global dairy prices had generally held their ground and the dollar was helping to boost local returns.
In December, Fonterra raised the midpoint of the 2024-25 season forecast farmgate milk price by 50c to $10, giving a forecast range of $9.50-$10.50.
Mr Gordon said the last two GlobalDairyTrade auctions had seen a solid lift in dairy prices although that followed declines in the two previous auctions. Overall they had held up better than the bank expected; its previous $10 forecast assumed prices would gradually edge down over the remainder of the season.
Chinese buyers have been much more prominent in recent months, with report they are needing to restock after letting their inventories run down to extremely low levels.
Whole milk powder has been particularly in demand as there are few countries other than New Zealand that exports it in significant amounts.
WMP prices have reached their highest since April 2022.
Meanwhile, Westpac’s first forecast of next season’s milk price is $10. That is the bank’s estimate of the final milk price, not where it is expecting Fonterra to set its own opening forecast which is likely to be announced in late May.
Given it is still a few months away from the start of the next season, it is appropriate to place a wide margin of uncertainty around the bank’s milk price forecast.
“Global economic conditions, trade policies and other geopolitical risks mean that both dairy prices and the exchange rate could end up a long way from our forecasts in the year ahead,” Mr Gordon said.
Rabobank’s latest agribusiness outlook report said global dairy fundamentals remained mostly balanced moving into 2025 and, assuming normalised trading conditions, the year ahead should bring with it a period of prosperity for New Zealand dairy farmers.
