8 Oct 2015

From bust to boom? Dairy payout estimates rise

12:10 pm on 8 October 2015

The latest dairy auction results have led to forecasters raising their estimates of farmer payouts this season to between $5 to $5.39 a kilo of milk solids.

Prices have gained around 60 percent over the past four auctions, while volumes being offered for sale have fallen markedly.

The price for the key commodity, whole milk powder, which underpins the price Fonterra pays its farmers, increased by 12.9 percent to $US2,824 a tonne on Tuesday.

But the question being asked is whether the price rises can be sustained or whether the seeds are being sown for the next boom-bust in dairy.

ASB Bank senior economist Chris Tennent-Brown hoped lessons had been learned from the most recent price slump.

"We're not thinking that prices will go booming away... we think the milk price will steadily grind back into the $6 - potentially as high as $7 over the coming years," he said.

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