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Fonterra tipped to lift milk price forecast

Fonterra tipped to lift milk price forecast on 'balanced' global dairy markets

By Rebecca Howard

March 20 (BusinessDesk) - Nathan Penny, senior rural economist at ASB Bank, expects Fonterra Cooperative Group to lift its 2017/18 milk price forecast to $6.50/kg or above from the $6.40/kg set back in December when it reports its first-half results tomorrow.

Penny notes that the informal market median expectation is for $6.45/kg but “dairy prices have strengthened considerably since the December update” with whole milk powder prices up by around 16 percent since the December update, while overall prices have lifted around 8 percent.

Penny said gains in the New Zealand dollar against the US dollar since December may partially offset the lift but “we anticipate that earlier hedging by Fonterra at lower NZD levels may soften the impact from the stronger NZD,” he said.

Overall, global dairy markets are largely balanced and “all up, prices are well-supported at this level and are thus likely to track sideways over much of 2018,” he said.

Tonight’s GlobalDairyTrade auction is expected to show that global dairy prices are largely unchanged, according to the OM Financial Limited, although the NZX Derivatives Market is pointing at a decline in whole milk powder and butter prices.


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