MyFarm tips lower Fonterra milk price forecast

MyFarm expects the milk price will rise as the season goes on. Photo / Christine Cornege

Farm investment company MyFarm expects Fonterra to announce a $6.60 to $6.80 a kg milk price for the 2014/15 year when the co-operative issues its forecasts this morning.

That would compare with Fonterra's forecast for the current 2013/14 season, which ends on May 31, of $8.65/kg milk solids.

Part of the reason for a lower opening price was that major Chinese buyers were staying out of the market at the Global Dairy Trade auction, MyFarm said in a market commentary.

"In due course they will need to start buying again, which will place upward pressure on prices," MyFarm said.

Bank economists have been picking a starting milk price of about $7 a kg for 2014/15.

MyFarm said it had confidence that the milk price would increase as the season progressed, to about $7 to $7.20/kg by the end of 2014/15.

It said the dairy industry had benefited from a milk price that had increased at a compound growth rate of 5.4 per cent a year over the past decade.