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MILK MONITOR
Peak milk key after slow start By Gerald Piddock
Each month the milk monitor delves into the dairy industry and gives us the low-down on the good, the bad, the ugly and everything in between.
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ighter supply and firm demand saw Fonterra lift this season’s forecast so that it’s now equalling its highest ever forecast of $8.40/kg milksolids at a midpoint range. The new forecast puts it in line with many of the banks. It’s the same as Westpac, yet still below ASB, which is $8.75/kg MS and below ANZ’s $8.20/kg MS. Most of these banks raised their forecasts in the past few weeks due to lower-than-expected milk volumes in August. Westpac cited the 4% fall in production as the key reason for the 75c upgrade to $8.50. This was reinforced by the October 20 GDT auction, which saw prices lift 2.2%. Its Dairy Update for that day said it expected ongoing weakness in global dairy production will continue to underpin global dairy prices, citing production weakness having continued through September and into October. ASB’s Rural Economic Note suggested high feed costs and logistical issues could offset farmers’ abilities to increase production when it lifted its forecast. ANZ increased its price 50c, pointing to stable supply and demand. “If markets remain in balance, then prices shouldn’t stray too far from current levels, which bodes well for the milk price,” it said in its October Agri Focus. Westpac economists expected production to fall 1% compared to last season after the cool, wet end to winter and early spring. “With the first four months of the year accounting for around 20% of the season’s production, it will be very difficult for production to be made up later, particularly relative to last season’s record level of production,” the bank said. It anticipated that “weak” production data for September will reinforce these high prices. It, along with the October production
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The slow start to the season has seen the banks increase their milk price forecasts, but what effect September and October’s production have on those forecasts remains to be seen.
figures, will be make or break for spring. An unscientific straw poll regarding September production taken on social media showed that milk volumes were both up and down – depending on the farmer’s location and way too varied to make any accurate predictions yet. September along with October’s production data will be most revealing, with September figures due to be released. If there is a kind spring, allowing farmers to maximise peak milk as well as make the most of cutting and making grass silage and sowing this year’s maize crops in between rain showers, it will set them up well for the rest of the season. For Fonterra, its primary drive to lift the milk price was continued demand and below average supply at a global level. “These supply and demand dynamics are supporting the current pricing levels, and a higher contract rate has given us the ability to narrow the forecast range,” Fonterra chief executive Miles Hurrell said when the new forecast was revealed. He emphasised it was still early in the season and the situation can change globally. It also can be affected locally as the country hits peak milk. These include the impact of staff shortages in the contracting industry on the ability to make supplementary feed and whether high input costs and tighter regulations could put off some from taking full advantage of the high milk price.
Niwa’s September to November outlook points to warmer than average temperatures, particularly in the east of both islands. Rainfall is likely to be below normal in the east of the North Island, near normal in the west of the South Island, and about equally likely to be near normal or below normal in all remaining regions across Aotearoa New Zealand. Soil moisture levels are about equally likely to be near normal or below normal in the north and west of the North Island, most likely to be near normal in the east of the South Island, and about equally likely to be near normal or above normal in the west of the South Island. In other words, a pretty normal spring. Elsewhere, dairy production is starting to ease in the Northern Hemisphere as it comes into autumn – a point Hurrell also made in the forecast announcement. These supply issues are also a reason why ASB is feeling so bullish. “Still, global growth forecasts remain positive and the experience of covid tells us that dairy’s status as a staple food keeps prices supported, even in times of volatility. “At any rate, farmers can be confident of a farmgate price north of the $7.54 kg MS they received last season,” it said. On that, it is right and a slowish start to peak milk is not a bad thing when the milk price is that high. n
DAIRY FARMER
November 2021
26/10/21 12:50 PM
