21 Jan 2015

Farmers hope for dairy price recovery

2:21 pm on 21 January 2015

Dairy farmers are hoping that last night's global dairy trade auction signals a sustained recovery in prices.

A farmer at milking time in the cowshed on a dairy farm near Cambridge.

Photo: AFP

The average price in the overnight auction lifted by 1 percent, the third increase in a row.

But, more significantly, the whole milk powder price lifted by 3.8 percent to more than $US2300 a tonne.

That is important because Fonterra's milk payment to farmers is based on the whole milk powder price.

Federated Farmers dairy chair Andrew Hoggard said farmers would be hoping that global dairy prices recovered enough to at least underpin the current forecast milk price of $NZ4.70 a kilo of milk solids.

"Fonterra based that forecast milk payout on the expectation of lifts in GDT [global dairy trade]. They'd scaled it back from what their previous expectations were, but still we do need to see lifts in that GDT for the $4.70 payout to be realised," he said.

"We've had about four cuts so far this season. We'd really hate to see another one."

ANZ lowered its milk price forecast again to $NZ4.35 a kilo ahead of last night's global dairy trade lift because it was predicting a more prolonged and modest recovery in dairy prices, combined with a strong New Zealand dollar.

However the primary industry analyst, Agri HQ, has lifted its farm gate milk price by 10 cents to $NZ4.40.

Agri HQ's Ivan Luketina said it appeared that the dairy prices had bottomed out and last night's result was in line with what the market was expecting.

"Going into the auction, the NZX futures dairy market was pricing in a January average of around $US2300 a tonne for whole milk powder and that would have indicated a price rise to $US2355 at this auction. So it was slightly below that expectation but a large rise none the less."

It seemed the market was back on track to where predictions were at the end of 2014.

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