ASB senior rural economist Nathan Penny believes the NZ dollar falling below US63c is worth up to 50c/kg to the milk price after the delay of the Fonterra currency hedging policy works through.
Fonterra was already forecasting $6.25-$7.25/kg ahead of any currency boost and ASB has pegged $7 before the possible currency upside, Penny said.
Participants in the Global Dairy Trade market are still waiting to see if the NZ spring peak is going to exceed last season’s but that is unlikely.
After production to the end of August was 3.8% ahead, milk flows in September and October were reportedly variable.
“If the spring peak proves to be flat compared with last season then global dairy prices are likely to firm for the rest of 2019,” Penny said.
The most-recent GDT result was a 0.5% increase in the price index compared with the first October sale, incorporating skim milk powder up 2.4% and whole milk powder unchanged.
After the GDT sale the NZX milk price predictor rose 14c to $7.20 and the spot price is now at $7.65. The spot price indicates what the milk price would be if October 15 GDT prices were achieved over the entire dairy season at latest exchange rates.
Westpac’s NZ strategy head Imre Speizer said WMP prices have risen 6% since July.
The GDT price index is up 21% since this time last year.
“NZ growing conditions in September and October have been mixed with soil moisture around average but temperatures in the South Island below average.
“Constrained supply is one possible explanation for futures markets consistently predicting moderate gains in GDT auction prices,” Speizer said.
