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Softening the dairy blow

15 August 2014

Softening the dairy blow

NZ dollar is under pressure
Interest rate predictions delayed
Meat sector outlook remains bullish

While eleven of the last twelve dairy auctions have recorded price falls, the sheer magnitude of the falls is bringing other factors in to play, according to the latest ASB Farmshed Economics Report.

“With dairy prices down by 37 percent on a year ago, the NZD has finally come under some pressure” says Nathan Penny, ASB Rural Economist.

“The NZD has passed its peak. We expect the NZD to trade at around 85 US cents for the rest of the year.”

“The dairy price falls are also a major reason why we’ve pushed back our interest rate call.” ASB Economics now expects the next OCR increase in March 2014 rather than their previous call for a December 2014 hike.

Meanwhile, the outlook for the meat sector remains bullish.

“While the lamb market is quiet, continued tight supply both here and in Australia points towards prices grinding higher over the season ahead,” explains Mr Penny.

“Beef prices also continue to hold up at a high level. In fact, continued high prices appear to have given beef farmers enough confidence to increase the beef cattle herd for the first time in eight years,” he concludes.

About Farmshed Economics
Farmshed Economics is a monthly report that gives ASB’s economic take on recent rural developments and includes our outlook for rural commodities and the relevant financial markets. Each quarterly Farmshed Economics will have a special feature on a relevant topic.

The full report is available here.


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