Rabobank sticks with $7.60 milk price despite GDT drop

Yesterday Rabobank announced a lift in its 2019/20 milk price forecast to $7.60 due to strong demand for New Zealand product.

However, after another drop in the Global Dairy Trade Auction overnight, Rabobank dairy analyst Emma Higgins was a bit worried when she spoke to The Country's Jamie Mackay today.

"It does appear that I have given it the kiss of death doesn't it?" said Higgins.

The GDT price index fell 5.1 per cent from the previous auction two weeks ago. Whole milk powder slumped 6.7 per cent to US$3,099 a tonne, its lowest since September, having reached a three-year high in the previous auction.

"The magnitude of that decline did surprise me" said Higgins.

However she remained confident in the bank's $7.60 forecast for the rest of the season.

Rabobank's Dairy Analyst Emma Higgins. Photo / Supplied

"I do think the fundamentals are still very supportive in terms of higher commodity prices which I do think will translate into a milk price at the upper end of Fonterra's current range.

"So combined with a favourable exchange rate hopefully across the course of the season, if it averages out and depending on hedging policies. I think $7.60 is still possible".

Listen below:

Higgins said the dairy sector still looked like a strong performer for 2020 due to modest supply growth globally and a positive demand outlook, "pending a strong China economy".

"China on the whole is still positive, but there are some watching briefs. Particularly over the Chinese economy and also around their local milk production as well".

Also in today's interview: Higgins talked about how the weather was affecting New Zealand's production season to date.