Global Dairy Trade: Market drives higher but NZ profit outlook revised

International dairy prices have jumped again. But a leading New Zealand agricultural economist says the milk market good times are unlikely to last.

International dairy prices have risen yet again on a major trading index but a New Zealand market observer has warned the trend is likely to taper off.

Prices increased 1.9 per cent across the board in the latest Global Dairy Trade auction, to a headline figure of $5885 per metric tonne ($US4287/MT).

With more than 120 bidders, volume traded exceeded 30,000 metric tonnes for the first time this season.

In market-exposed New Zealand, the latest trade jump prompted a revision of Kiwi farmgate figures from seasoned observers.

Westpac NZ senior agri-economist Nathan Penny confirmed today he had upgraded the bank’s 2021-22 farmgate milk price forecast by 40 cents to $NZ8.90/kg ($8.54/kg).

“If achieved, this would be a record high, surpassing the previous record of $NZ8.40/kg set back in 2013-14,” Mr Penny said.

“We have set our opening 2022-23 farmgate milk price forecast at $NZ6.90/kg ($6.62/kg).

“This forecast represents a $NZ2.00/kg drop from our 2021-22 forecast.”

Mr Penny said the catalyst for Westpac’s 2021-22 forecast revision was the downgrade of its New Zealand milk production forecast for the season.

“We now expect New Zealand production to fall by 1.5 per cent compared to last season,” he said.

“Previously, we expected production to fall by 1 per cent.

“This season, New Zealand production has been on the back foot. Winter and spring have been either wet or cold or both in many parts of the country.

“As a result, production for the first four months of the season is running at 3.1 per cent behind the same stage of last season.”