Fonterra's board will meet on Friday to review the farmgate milk price. Photo / NZME.
Fonterra's board will meet on Friday to review the farmgate milk price. Photo / NZME.
Fonterra's board will meet on Friday to review the farmgate milk price.
Futures market pricing suggests wholemilk powder prices will fall by about 10 per cent at tomorrow's GlobalDairyTrade (GDT) auction, says OM Financial.
Fonterra's board will meet on Friday to review the farmgate milk price for 2015/6, which currentlysits at $5.25 per kg of milksolids.
Some bank economists expect the forecast to drop to the low $4s, or to perhaps the high $3s - well below the breakeven point put at $5.70 per kg.
The middle of the wholemilk powder curve continued to edge up as the market digested the forecast changes to GDT volumes, said Nigel Brunel, OM director of financial markets.
"It's going to be a busy week this week for milk," he said. "GDT is on [tomorrow morning NZ time] and even though we have seen a small recovery in the curve, the current futures suggests we will be up to 10 per cent lower," Brunel said.
ANZ said this week's auction would be crucial for where Fonterra's forecast is pitched, particularly as the next eight auctions would account for about 45 per cent of annual sales for wholemilk powder.
"For us another decline seems likely followed by a period of stability at low levels," ANZ said.
The two most likely catalysts for improvement would be China boosting its purchases and/or New Zealand milk supply declining, ANZ said.
"Given it is still relatively early in the season Fonterra are likely to build in a more optimistic forecast and therefore pitch their 'reforecast' around the $4.25-$4.50/kg mark," the bank said.
