Prices are expected to stay fairly firm in the short term, softening as we head into the 2018-19 dairy season. NZ processors are pretty well sold up for this season, leaving it a bit of a sellers’ market for any product left. It’s unlikely there will suddenly be any extra product available from New Zealand. The AgriHQ forecast is for NZ milk production to finish the season down 1.5% on last season, with milk over the final three months to track behind last year.
Commodity prices are expected to ease as NZ starts selling for next season but that is a while away. Focus at this time of year is usually on the northern hemisphere.
European milk production hasn’t ramped up as quickly as expected though it is still growing. The region has been affected by cold conditions heading into spring. A strong peak is still expected but in the meantime the lower than expected milk supply is keeping prices up, particularly for butter.
Milk production is very strong in the United States. But the domestic market is active, with plenty of buying and selling occurring, keeping prices buoyant there too.
If commodity prices hold as indicated, Fonterra’s $6.55 a kilogram of milksoldids farmgate milk price forecast should be achievable. The AgriHQ forecast is $6.30/kg MS – quite some way behind Fonterra’s forecast. However, Fonterra has likely sold product at higher prices than indicated by GDT, which have not been taken into account in the AgriHQ forecast.
