Fonterra revised its 2018/19 forecast Farmgate Milk Price [News Oceania n°21/2018]

Period: October 1 – 12, 2018

Lingering drought in Australia limits milk production, which was -3.6% in August 2018 y-o-y. Milkfat and protein content are also lower.

Milk Producers, faced with higher prices for feed and less water availability, are reducing the herd sizes by 25% (the typical annual culling involved about 20% of herd sizes).

New Zealand continues to benefit from nearly ideal conditions for milk production, which in the first quarter of the 2018-19 production season is 5.5% higher than the same period of the previous season.

Fonterra increased its forecast New Zealand milk collection volumes by 1.3% to 1,550 million kgMS and revised its 2018/19 forecast Farmgate Milk Price from 6.75 NZD/kgMS to a range of 6.25-6.50 NZD/kgMS

The overall weakness in recent GDT events has moved prices lower for the dairy products.

This is especially true for WMP, which is the most important New Zealand dairy product exported in terms of dollar value. With exports remaining generally steady, some WMP plants are comfortable to slightly back off and let more milk flow to other uses, often Cheese and Butter plants. The lower prices have led to more recent interest from Buyers such as China in contracting for future deliveries.

Oceania Cheddar prices are slightly down. Production is increasing, made possible by increasing milk volumes now being available to cheese plants.

Butter prices are lower. Production is above expectations for this time of the year. Some Buyers have heightened interest in contracting to lock in current pricing.

The SMP market is also down. It is still early in the season and there is plenty of SMP available for interested Buyers. Contracting is moving but not with any real sense of urgency among Buyers.

– Assessments about market trend are expressed in US$;
– Dairy season: July, 1st – June, 30th (Australia), June, 1st – May, 31st (New Zealand);
– Source: USDA summarized by the CLAL Team