Although prices are 30% below the highs reached last year, ASB economist Nathaniel Keel says the more bullish growth outlook for dairy has a lot to do with changing expectations of monetary policy makers.
“Markets have become more confident that rates do not need to rise further, and that the global economy can achieve the famous 'soft landing'.
“Traditionally 'safe' assets like government bonds and the US dollar are out of favor, and 'risky' assets like stocks and commodities are back in style.”
In recent GDT auctions, the key feature has been the absence of Chinese purchases. In the last three months, the world's largest milk importer has bought less than 40% of total milk powder (LPE) in each auction, compared to the historical average of 55-60%, it said.
“We have revised the 2023/24 milk price forecast twice since our last report. The recent rally has raised our forecast for the 2025 season to a firm price of $8.30 per kg.
If Fonterra's opening forecast for 2024-2025, announced at the end of May, is close to this, it will be a positive start to the new milking season.
OCLA care: NZ$8.30/kg. of dry matter or useful solids (Butyrous Fat + Protein) x 0.60827 NZ$/US$ = US$ 5.05/kg.SU x 7.16% SU Argentina (year 2023) = US$ 0.36/liter milk x $894/US$ Export (80 % BCRA gross sales + 20% cash settlement) = $322/litre of milk.
Translated by OCLA from Dairy Farmer NZ Newsletter
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