Published: Thu, May 18, 2017
Money | By Armando Alvarado

ANZ and Westpac upgrade next season's NZ milk price forecasts

ANZ and Westpac upgrade next season's NZ milk price forecasts

Prices of lactose, skim milk powder and cheddar climbed 2%, 1% and 0.6%, respectively.

ANZ has joined ASB in predicting a $6.75/kg farmgate milk price for next season and Westpac has lifted its forecast to $6.50/kg from $6.10/kg.

Despite expectations of a weaker performance in this auction for the key Whole Milk Powder, WMP prices in fact eked out a 1.3% gain, which was also a fifth consecutive gain.

The lift contrasted with indications from dairy futures and provided a chance of a lift for this season's $6 milk price, ASB senior economist Chris Tennent-Brown said.

"The milk-fat products were the star performers", AgriHQ dairy analyst Susan Kilsby said in a note.

ANZ economists, who as recently as last month were picking an opening milk price forecast for the new season of in the "high $5" per kilogram of milk solids range, have now come out with a pick of an opening price of $6.75.

"With breakeven for the sector in the low-$5s, the sector is moving back into the black and spare cash should start to emerge later this year".

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Debt repayment from the poor 2015-16 season would be a big focus.

European Union wholesale markets weakened in April for most products, with the exception of butter and whey powder.

Production in Europe had already risen notably off 2016's trough and more product would become available to global markets as New Zealand's 2017-18 season ramped up from September.

"With New Zealand's 2016/17 season done and dusted, we stick with our milk price forecast of $6/kgMS - in line with Fonterra's latest update", she said.

Milk production was expected to continue trending higher over the remainder of the year, as farmers responded to higher farm-gate prices on offer.

"But for next season, we're upgrading our milk price forecast to $6.50/kg".

Fonterra also announced it will pay its Australian suppliers an additional 40 cents per kgMS next season, bringing its forecast full year milk price range to $5.70 to $6.10 per kgMS.

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