Rabobank dairy analyst Emma Higgins spoke to The Country's Jamie Mackay today to explain the rationale behind the bank's decision to lift its forecast milk price for the 2018-19 season to $6-80 - up from the recent prediction of $6-40.
"One of the major reasons for this uplift in milk price comes back to the fact that we have to take a position on currency and it's very hard to forecast commodities, let alone currencies," says Higgins, "We are looking at a weaker dollar again ... so ultimately if we see a continued weakness in the New Zealand currency, that could be beneficial for milk prices, although the timing of that may impact more towards the next season as opposed to this season."
Another reason Rabobank is anticipating a higher milk price is that there is less milk coming out of the Northern Hemisphere says Higgins.
"We've got issues in Europe ... with spring conditions, we've also got higher feed costs ... right around the globe and in particular the US."
Higgins says rising prices for alfalfa hay in the US and soy and corn in parts of South America results in "tighter margins [which] will help to see slower milk production grow over those next 12 months."
