RESILIENT demand for butter and cheese in a tighter global supply environment has led to one forecaster significantly increasing farmgate milk price expectations for next season.
Freshagenda analyst Steve Spencer, as part of his milk price outlook for June released last week, has forecast a season price of $6.10-$6.50 a kilogram of milk solids for next season- starting July 1. This forecast is made up of a commodity milk value of $5.80/kgMS with a 50c/kgMS “value capture” component. The latter refers to what can be achieved by milk companies. A stark contrast to his predictions earlier this season and a rise from the $5.35-$5.60/kgMS forecast back in April.
The outlook is based on a $US0.78 Australian dollar, a slightly weaker value than what was used for the April forecast. It also assumes fundamental commodity values will improve due to supply constraints before Northern Hemisphere production recovers in the middle of next year.
Last week the Global Dairy Trade auction was down 1.3 per cent to $US3487 a tonne. Whole milk powder was down 1.1 per cent to $US3205, with cheddar down 3.6 per cent to $US3998/tonne.
New Zealand bank ASB predicted, in its Rural Economic Note, that price softness could reflect the “firm NZ production over April. Production for April was 3.7 per cent more than the same month last year.”
“However, we suspect the global butter shortage remains acute,” it said. “The boost from firm April production is likely to be short-lived. Indeed, we still expect butter and/or anhydrous milk fat prices will set fresh record highs over the coming months.”
By: SIMONE SMITH
Source: The Weekly Times