11 Apr 2016

Dairy prices won't improve for another season - AgriHQ

4:53 pm on 11 April 2016

Dairy commentators who are predicting milk prices will pick up within the next year are wrong, according to an AgriHQ analyst.

ASB economist Nathan Penny said data out of Europe showed milk production there was slowing, which should raise the payout in New Zealand to $6 per kg of milkfat by the end of next season.

Minister for Primary Industries Nathan Guy has said the medium- to long-term outlook for New Zealand was strong and, after a tough season, prices would pick up.

However, AgriHQ analyst Susan Kilsby said that wasn't the case.

"We're not expecting production in Europe to drop in a hurry, we're expecting strong growth for at least the next few months and [for it] not really come back until they hit their autumn and winter.

"Once that happens, then we need to move through all this product that has been built up, so essentially we are expecting it will take at least another season for prices to improve."

Miss Kilsby said there had been regulation changes in China around reconstituted milk, and the market was staying stable in Europe.

"The EU intervention scheme for skim milk powder reached its cap of 109,000 tonnes at the end of March and it has been proposed that the cap on that programme be extended to 218,000 tonnes but that legislation has yet to be ratified.

"So in the interim we're seeing a tender process with skim milk powder being opened up, with tenders for that having to be submitted by 19 April, so a little bit of a holding in that market at the moment."

Get the new RNZ app

for ad-free news and current affairs