Dairy prices across the board, as measured by the GDT price index, were mostly unchanged from the last auction on November 8.
Westpac senior economist Nathan Penny said consumers were already seeing the benefits of lower cheese prices.
“If the price fall is sustained, then we would expect to see that reflected in supermarket prices, but I think it would be in the New Year before that starts to flow through.”
In broad terms, the auction result showed the market looked to be in a holding pattern as participants long-awaited rebound in demand from China, he said.
Whole milk powder prices - which play the biggest role in determining Fonterra’s farmgate milk price - rallied by 1.9 per cent to US$3027 a tonne but were down from the 5 per cent gain suggested by futures market pricing.
Meanwhile, Penny said Chinese demand is hinting at a pickup.
Recent economic data releases in China have been more positive, which Penny said may translate into higher demand over time.
“However, on balance, we remain cautious.
“There have been both positive and negative developments since we lifted our milk price forecast on October 18, and these have largely cancelled each other out.”
Westpac’s farmgate milk price forecast is $7.25/kg while Fonterra’s forecast is in a range of $6.50-$8.00/kg,
NZX dairy analyst Rosalind Crickett expected the remaining auctions for 2023 to be “eventful”.
“With a potentially more restricted milk supply over the coming months globally, El Niño weather event in the Southern Hemisphere and ongoing geopolitical tensions, there are a variety of factors at play,” she said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
