16 Sep 2015

Banks lift forecast dairy payouts as auction price rises

1:54 pm on 16 September 2015

Banks are upping their forecast dairy payouts on the back of a possible revival of fortunes for New Zealand's struggling dairy industry.

The average overall price in the the overnight Global Dairy Trade auction rose 16.5 percent to $US2,568 per tonne.

Whole milk powder jumped 20.6 percent to $US2,495.

ASB has increased its forecast payout for the season to $5 a kilo.

A more cautious ANZ is predicting a price between $4.25 and $4.50, and Westpac is forecasting $4.30 per kilo.

ASB rural economist Nathan Penny said the auction results were stronger than expected.

He said he expected production to fall 5 percent this season, which will drive prices up even more.

"We've seen and been hearing from farmers that they've culled aggressively to date, and expect to cull further once we get through spring and the peak milk production. So that means dairy herds are going to be smaller, and that will lead to less milk production."

However, Mr Penny said any further price increases depended on production falling as predicted.

"By the end of this year we can see whole milk powder prices lifting from $US2,500 to $US3,000, and then another $US500 to $US3,500 per tonne by the middle of next year."

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