AgriHQ revises down farmgate milkprice forecast

AgriHQ has dropped its forecast farmgate milk prices, but they are are expected to improve in the second half. Photo: Christine Cornege.

AgriHQ has revised its forecast farmgate milk price for 2015/16 down to $5.70 a kg of milksolids from a previous forecast of $6.50, based on NZX dairy futures prices for the first six months of the season.

Dairy analyst Susan Kilsby, writing in the latest edition of AgriHQ's Farmgate Dairy report, said she expected prices to improve in the second half.

"During the latter half of the season we assume that whole milk powder prices will return to their long-run average price as global markets come back into equilibrium," Kilsby said.

At $5.70 a kg, the farmgate milk price would be only slightly above Dairy NZ's estimate of an average breakeven point of $5.40 a kg for most farmers.

Fonterra's forecast for the current season, which ends on May 31 sits at $4.70 a kg, compared with AgriHG's estimate of $4.51 a kg.

Earlier today, Hokitika-based co-operative Westland Milk Products said it had cut its forecast payout for the current season to $4.90-$5.10 per kg of milk solids, before retentions, compared with previous forecast of $5 to $5.40 a kg.

Westland Milk chief executive Rod Quin said prices were such that a $5.20 payout seemed possible before the recent GlobalDairyTrade auctions, as buyers looked to New Zealand to secure supply ahead of the dry conditions during January and February.

"However, customer sentiment has now changed significantly," Quin said in a statement.

Skim milk powder out of Europe is being offered at US$2,100 - $2,200 per tonne - well below offers from New Zealand of $2,600 - $2,800 a tonne and GDT prices of $2,300 to $2,400 a tonne.