5 Aug 2015

Cut in forecast dairy payout 'certain'

4:48 pm on 5 August 2015

An economist says there's only one way Fonterra can go with its forecast payout to farmers this Friday - and that's down.

Milk at Pak n Save Kilbirne.

Photo: RNZ / Alexander Robertson

Dairy prices plunged again at the latest global dairy auction, with the key whole milk powder price slipping 10.3 percent to $US1590 a metric tonne.

The dairy co-operative is holding a meeting at the end of the week and will be reviewing its farmgate milk payout for the current season.

It set a cautious opening price of $NZ5.25 a kilo of milk solids in May.

BNZ senior economist Doug Steel said a cut to the forecast was all but certain.

"They could easily drop it by $1, given where prices have got to," he said.

But Mr Steel said there could be some upward pressure on dairy prices in the months ahead.

"We're not sure that the market at the moment is properly pricing the weather risk around Oceania milk supply, ie El Nino, and how much that might dent production both in New Zealand and Australia," he added.

He said BNZ had forecast a payout of $3.80 a kilo.

Get the RNZ app

for ad-free news and current affairs