Rabobank predicts strong farmgate milk prices

Photo / File

Rabobank is forecasting a $7.15/kgMS farmgate payout for the 2019/2020 season but an Ettrick dairy farmer is more cautious and is not ''counting his chickens'' until Fonterra makes its official announcement within the next few weeks.

The bank's dairy analyst Emma Higgins, in her report ''Fourth time lucky: Back in the black once more'', suggested a fourth consecutive season of strong milk pricing could lead to a predicted $7.15/kgMS, along with a $6.65/kgMS for the 2018/2019 season.

Higgins said '' stagnant global milk supply and robust global demand for Oceania-origin dairy products was expected to support strong milk prices for New Zealand farmers over the remainder of the current season and into next''.

''From December 2018 through to early April 2019, commodity dairy prices have jumped 24 per cent with butter and skim milk powder, the two products to shift the needle most significantly,'' she said.

Rabobank dairy analyst Emma Higgins. Photo / Supplied

''We expect these strong global prices to hold in the short term, underpinning a rise in the current season forecast and a strong opening forecast for the 2019/20 season.''

Ettrick dairy farm owner Grant Scott said the situation looked positive.

''All the stuff I have seen would suggest production around the world was lagging behind demand,'' he said.

''The challenge is how long does it last?

''Don't go counting chickens.''

Scott said the days of wholesale conversions were long gone.

''There might be one or two conversions [as a result of the higher payout] where it makes sense to do so.''

However, a lot of people were still dealing with the low payouts and tough times during the past three or four years, he said.

Higgins warned farmers to expect price inflation for on farm purchases and expenditure for fixed costs such as electricity, feed and wages.

Higgins said $7.15/kgMS was Rabobank's forecast farmgate milk price based on the calculations set out in the milk price manual, which applied to Fonterra.

''This is a forecast and so this will change over the coming season to reflect the supply and demand dynamics that are ever evolving.''