17 Oct 2014

Farmgate milk prices still likely to fall

9:08 am on 17 October 2014

The latest rise in global dairy prices will be a welcome relief to farmers, but does not necessarily signal a return to a higher farmgate milk price.

140814. Photo Contact Energy. Te Mihi power station

Contact Energy's newest geothermal power station, Te Mihi, near Taupo which opened in August this year. Photo: Contact Energy

Average dairy prices rose 1.4 percent in the international auction to $US2640 per tonne, this week.

Fonterra is watching the auctions to see whether its forecast for the farmgate milk price is on track at $5.30 per kilo of milk solids.

But analysts think Fonterra's forecast is too high, and will need to be revised again, somewhere in a range between $4 and $5.

BNZ economist Doug Steel said it was unlikely Fonterra would make a further revision at this stage, but he sees considerable downside risk as the season progresses.

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