Economists expect Fonterra's milk price for 2019/20 to come in near the the top of the co-op's range. Photo / Supplied.
Economists expect Fonterra's milk price for 2019/20 to come in near the the top of the co-op's range. Photo / Supplied.
Economists' milk price forecasts for the current 2019/20 season have drifted towards the top of Fonterra's wide $6.25 to $7.25/kg range, driven by constrained supply and a significantly lower New Zealand dollar.
Fonterra's milk price for the season just ended came in at a respectable $6.35/kg.
Bank of New Zealandsenior economist Doug Steel said global dairy prices have stabilised over recent months, with a hint of increase.
"The US-China trade tension has been a poor backdrop and has kept us cautious all year, but dairy demand has been firm and generally subdued global milk supply continues to offer fundamental support," Steel said in a commentary.
"Resilience of global dairy prices to offshore uncertainties to date, coupled with a lower NZ dollar sees us revise our 2019/20 milk price forecast up to $7.10/kg (from $6.70)," he said.
Much will depend on how production pans out of the peak months of September and October, which some economists say may have slowed due to weaker-than-expected pasture growth.
ASB Bank rural economist Nathan Penny. Picture supplied
Penny sees a $7.50/kg milk price in the year ahead, based mostly on continued weakness in the New Zealand dollar.
Economists said Fonterra's currency hedging arrangements could be more favourable to the co-op in the next season compared to arrangements put in place for 2018/19.
The New Zealand dollar last traded at US63.9c, down from close to US70c last December.
Rural lending specialist Rabobank has forecast $7.15/kg for 2019/20, but has identified a slowing world economy as a key risk to the outlook.
Westpac is at the lower end of spectrum with $6.80/kg for this season and $7.00/kg for next - still high by historical standards.
Senior economist Michael Gordon said the bank was more cautious in its outlook due to slower economic growth in China.
"Consumers will not be immune to the slowdown," Gordon said.
