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


Westpac raises milk price forecast on strong GDT result

By Gavin Evans

Jan. 16 (BusinessDesk) - A fourth straight increase in dairy auction prices has prompted Westpac to raise its price milk price forecast for the current season.

The bank is picking a farm gate milk price of $6.30 per kilogram of milk solids, up from the $6.10 it had been picking early December. The upgrade puts its forecast at the top end of the revised $6-$6.30 range Fonterra provided last month.

Average prices jumped 4.2 percent to US$3,057 a tonne at last night’s GlobalDairyTrade auction, with the key whole milk powder price up 3 percent at US$2,777. The increases were higher than many economists had expected.

Westpac economist Anne Boniface said auction prices have now risen 7 percent during the past month and are up 11 percent from the two-year low reached in November.

While the bank had long expected a reversal of the price decline seen in the first half of 2018, the pace and extent of the improvement has been more rapid than it had expected.

She said the new forecast conservatively assumes auction prices remain near their current levels for the next few months.

“There’s clearly the potential for prices to continue to improve further from here if the recent lift in demand is maintained,” Boniface said in a note to clients. “However, we remain cautious about the potential for the pace of growth in Chinese demand for dairy products to slow as growth in China more broadly cools, and the potential for New Zealand milk production to continue to grow strongly.”

Dairy is New Zealand’s biggest export industry. China is the country’s largest trading partner and a major buyer of the cheese, butter and milk powders made or sold by Fonterra, Synlait Milk, A2 Milk, Westland Milk Products, Yashili and others.

Boniface said buying from China appears to have been unusually strong during the January auctions. That could in-part be due to poor domestic production, and appears unusual given recent data, including weak car sales and weak exports, which suggest growth in China is slowing sharply.

“At face value, the strong lift in the proportion of GlobalDairyTrade sales headed to the North Asian region - dominated by China - in January seems at odds with this.”

Fonterra Shareholders’ Fund units were unchanged at $4.71. Synlait shares rose 1.6 percent to $9.50. A2 Milk rose 2.2 percent to $11.90.

The biggest gainer in last night’s auction was skim milk powder, where the average price jumped 10.3% to US$2,405 a tonne.

Boniface said the increase was notable given volumes were 14 percent higher than the previous auction, when the usual seasonal trend would be for volumes to be declining this time of year.

Rabobank research analyst Emma Higgins attributed the sharp price jump to strong demand for fresh product, slower production growth in markets other than New Zealand, and the European Union almost clearing its SMP intervention stockpiles.

The latest GDT skim milk powder price is the highest in almost two years, she said.

“Strong sales over the past two EU Commission tenders held in December 2018 and January 2019 effectively shifted 141k tonnes of product,” she said.

“Buyers are looking to procure SMP while prices are still affordable.”

Higgins also noted the significant volumes of both whole and skim milk powder that China had imported during the last couple of months of 2018.

“We think at this point in time, stock levels have been replenished in China for the time being. Continued good weather across much of the country has seen feed reserves aplenty and milk production volumes still strong.”



© Scoop Media

Business Headlines | Sci-Tech Headlines


Auckland: Quarterly Update: Rents Stable During Third Quarter

The average weekly rent for a home in Auckland moved less than $1 during the third quarter, ending 30 September at $606.25, according to data from more than 16,000 rental properties managed by Barfoot & Thompson... More>>

Electricity Authority: Review Of Competition In The Wholesale Electricity Market Raises Questions

In March 2021 the Electricity Authority announced it would conduct a review into competition in the wholesale electricity market. The period of the review covers the sustained elevated electricity prices since an unplanned outage at the Pohokura gas facility in Spring 2018... More>>

Government: RSI ‘State Of The Nation’ Report Published
latest research, science and innovation system report card is now available, and outlines how the system is performing, Research, Science and Innovation Minister Megan Woods has announced. “The report seeks to increase transparency, act as a reliable data source and stimulate discussion... More>>

LAWA: New Zealand Lakes Are Diverse In Their Condition And Type

Freshwater scientists have come together through the Land, Air, Water Aotearoa (LAWA) project to summarise the condition of New Zealand’s monitored lakes. They have found a varied picture of lake condition... More>>

Pamu & Westpac: Market-leading Sustainability-Linked Loan

Westpac NZ and Pāmu have signed New Zealand’s most comprehensive Sustainability-Linked Loan to date, also the largest in the agricultural sector, and the first involving a state-owned enterprise. Pāmu, also known as Landcorp, is New Zealand’s biggest farming business. It will borrow $85m from Westpac NZ over three years... More>>

Retail NZ: Some Good News In COVID Announcements, But Firm Dates Needed

Retail NZ is welcoming news that the Government is increasing financial support for businesses in light of the ongoing COVID-19 lockdown, and that retail will be able to open at all stages of the new “Covid Protection Framework... More>>