Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


The worm turns for dairy prices and interest rates

The worm turns for dairy prices and interest rates

Dairy prices head south, as interest rates head north and the NZD remains strong.

Improving sheep sector incomes not out of the woods yet.

The record dairy price run has come to an end, according to the first ASB Farmshed Economics Report.

“Overall GlobalDairyTrade auction prices have declined a tad under 20 percent since February,” says ASB Rural Economist Nathan Penny. “And this may be enough to take the cherry off the top of this season’s record farmgate milk price.”

“Driving prices down is a stellar late season production run. We expect milk production to be up 11 percent this season compared to last, so in this sense, production giveth, but it also taketh away.”

Meanwhile, lamb prices continue to improve, with prices averaging 18 percent higher than the same period over 2013.

“We expect lamb prices to continue to rise over the remainder of the year due to improving international demand and tight local and Australian supply. However, prices remain below the five-year average for this time of year, with the lingering effect of drought still slowing down production.

“With wool prices going nowhere fast, it’s going to be another season before the sheep sector incomes return to pre-drought levels,” says Mr Penny.

Turning to the financial markets, interest rates are marching upwards following the RBNZ’s March Official Cash Rate increase. Moreover, the RBNZ has signalled more increases to come. “We agree that another 25bp rise is on the cards this month, but are not as convinced about the extent of subsequent hikes implied by the RBNZ forecasts.”

The NZD has lifted around 5 cents against the USD since the end of January as commodity prices hit or neared record highs and the RBNZ began lifting the Official Cash Rate.

“A firmer USD is the key to a lower NZD/USD exchange rate in 2014. However, if the USD remains weak then the NZD/USD may stay stronger for longer.”


Outlook

ASB expects dairy prices have further to fall says Mr Penny. “Overall prices have roughly another 10 percent to come down from today’s level before they begin to stabilise and recover.”
“Looking at the meat and wool sector, we expect lamb prices to keep rising over the remainder of the year, while beef and wool prices are set to tread water.”
Interest rates are set to rise steadily over the next two years concludes Mr Penny. “In contrast, we expect the NZD to ease back from current highs. Although, crucial to this outlook is an improving US economy and a firmer US dollar.”

About Farmshed Economics
Farmshed Economics is a new monthly report that gives ASB’s economic take on recent rural developments and includes ASB’s outlook for rural commodities and the relevant financial markets. Each quarterly Farmshed Economics will have a special feature on a relevant topic.
If you would like to receive ASB updates and reports by email: https://reports.asb.co.nz/register/index.html
The full report is attached and available online.

ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Media: Julian Wilcox Leaves Māori TV

Māori Television has confirmed the resignation of Head of News and Production Julian Wilcox. Mr Maxwell acknowledged Mr Wilcox’s significant contribution to Māori Television since joining the organisation in 2004. More>>

ALSO:

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Auckland Outage: Power Mostly Restored Overnight

Vector wishes to advise that all but 324 customers have been restored overnight. These customers are spread throughout the network in small pockets. The main St Johns feeder was restored around midnight allowing most of the customers in all affected areas to have power this morning. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news