Saturday, March 30, 2024

Revised Fonterra forecast welcomed

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Westpac Bank economists say Fonterra’s revised farmgate milk price forecast for the 2015-16 season of $4.60, while still below break-even level for many will be welcome relief for farmers.
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“Compared to Fonterra's previous payout forecast, today's announcement implies an increase in revenue of around $1 billion over the coming year.

“Our own current forecast for the 2015-16 milk price is $4.30, but with global dairy prices up nearly 50% from their recent lows the risks to this clearly lie to the upside (we will formally review our forecast after next week's [GDT] auction).

“This is a key reason why we expect the Reserve Bank will decide to keep the [official cash rate] on hold at its October meeting before resuming cuts in December.”

ASB expects the 2015-16 milk price to rise further.

“We still expect the season will ultimately result in a $5.00/kg price, though to attain that will require further US dollar dairy price gains over the rest of the season.

“A NZ production squeeze is a key reason why traded dairy prices have risen and why we expect they will continue to rise.

“Fonterra expects its milk collections to drop at least 5%, which tallies with our own nationwide forecast.”

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