Drop to $7 a kg of milksolids could punch $2.6b hole in dairy farm revenue: economist.
Dairy farmers can expect to see a drop in the milk price to around $7 a kg of milk solids from the current season’s record price of $8.65 a kg when Fonterra releases its 2014/15 forecasts next Wednesday, say economists.
Ongoing weakness in international dairy prices and a stubbornly high New Zealand dollar might also weigh on the payout for the current season – which ends on May 31 – by 20c to 30c a kg, they said. If a $7 milk price came to pass in the 2014/15 season, then it could punch a $2.6 billion hole in dairy farm revenue, assuming 3 per cent volume growth, Bank of New Zealand economist Doug Steel estimated.
A reduction of that order across the sector would equate to 1.2 per cent of New Zealand’s nominal GDP over calendar 2013.
The dairy sector accounts for more than 30 per cent of merchandise exports and has been a key driver of New Zealand’s improved economic performance over the past year or so.
At this week’s GlobalDairyTrade auction, a 1.8 per cent decline to an average winning price of US$3783 a tonne took the cumulative US dollar fall to 25 per cent since early February, or 28 per cent in New Zealand dollar terms.
The auction was the last before the farmer-owned co-operative announces its first pick for next season on Wednesday next week.
«We expect Fonterra to shave $0.20-0.35/kg off the current milk price forecast of $8.65/kg for 2013/14, with risks of a larger cut,» ANZ said in a commentary.
The bank said next season’s milk price was likely to be around the low-to-mid $7 mark, which would still be firm by historical standards.
Source: NZ Herald
Dairy farmers can expect to see a drop in the milk price to around $7 a kg of milk solids from the current season’s record price of $8.65 a kg when Fonterra releases its 2014/15 forecasts next Wednesday, say economists.
Ongoing weakness in international dairy prices and a stubbornly high New Zealand dollar might also weigh on the payout for the current season – which ends on May 31 – by 20c to 30c a kg, they said. If a $7 milk price came to pass in the 2014/15 season, then it could punch a $2.6 billion hole in dairy farm revenue, assuming 3 per cent volume growth, Bank of New Zealand economist Doug Steel estimated.
A reduction of that order across the sector would equate to 1.2 per cent of New Zealand’s nominal GDP over calendar 2013.
The dairy sector accounts for more than 30 per cent of merchandise exports and has been a key driver of New Zealand’s improved economic performance over the past year or so.
At this week’s GlobalDairyTrade auction, a 1.8 per cent decline to an average winning price of US$3783 a tonne took the cumulative US dollar fall to 25 per cent since early February, or 28 per cent in New Zealand dollar terms.
The auction was the last before the farmer-owned co-operative announces its first pick for next season on Wednesday next week.
«We expect Fonterra to shave $0.20-0.35/kg off the current milk price forecast of $8.65/kg for 2013/14, with risks of a larger cut,» ANZ said in a commentary.
The bank said next season’s milk price was likely to be around the low-to-mid $7 mark, which would still be firm by historical standards.
Source: NZ Herald