However, there are still many uncertainties contributing to volatility, the weather and exchange rates not being the least of them.
Politics are also adding to the mix with America’s sudden moves in trade wars and the effect of the Canada-United States agreement on the former’s milk rules that result in Canadian farmers adding to the glut of skim milk powder on global markets.
Looking through the NZX crystal ball at the longer-term shows the farmgate milk price contracts for September 2019 at $6.20/kg MS, September 2020 at $5.96 and September 2021 at $7.
That shows those trading futures contracts less optimistic than Fonterra’s $6.25 to $6.50 prediction and Rabobank’s $6.65 for this season. Most market commentators, however, agreed broadly with the futures market. At its last revision the NZX took 15 cents off its milk price prediction for this season. It now sits at $6.18.
The commodities futures market has been trading up slightly overall recently but it indicates a slip is expected going into November before heading up.
However, for NZ’s key whole milk powder market the futures do indicate a steady but unhurried climb from the $2620 a tonne settlement price on October 26 to $2855 a year from now.
Skim milk powder traders are looking for a slow rise from $2025 to $2225 about August next year before the price slips below $2000. Anhydrous milk fat and butter prices are expected to follow a similar pattern.
The people at NIWA reading the weather’s tea leaves expect average or above average temperatures this month, making the rain a decisive factor in grass growth and therefore milk production.
They say most of the country can expect roughly normal rain totals with a chance of slightly lower rain totals, especially in the east.
And should an El Nino develop this summer it will not be in the strong category so is not expected to be of similar intensity to those experienced in 2015-16, 1997-98 and 1982-83.
Milk production in NZ is running 5% above last season for the first three months of the season but Rabobank expects that to even out to a 2% rise over the whole season.
It says the buoyant NZ milk flows continue to provide buyers on the commodity markets with no urgency to secure supply.
“However, NZ milk supply is bucking the global trend of slower output.”
RaboResearch expects global milk supply to grow only modestly over the next 12 months.
“While this will provide some upside to commodity prices, NZ’s peak milk flows need to be worked through first.”
And stocks of SMP around the world remain burdensome.
“European intervention stocks still need to be worked through, India has tagged a stockpile of SMP for export and US non-fat dry milk stocks are higher than the prior year.
“But there is some potential good news for SMP.
“As part of the USMCA trade agreement Canada has committed to limiting surplus SMP onto global markets.
“This could prove helpful in a market overloaded with aging SMP,” it said.
Most currency values have softened against the US dollar this year.
Rabobank expects the USD to remain well supported going into next year so expensive inputs for farm costs look set to continue.
“Should commodity prices lift as well, emerging markets could face a double whammy with weaker buying power in key regions and more expensive goods.”
