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Dairy mist has lifted, but outlook is still cloudy

Key highlights

Dairy prices bounce overnight, ending the 10-auction falling streak.
Weak market sentiment is dissipating and focus is turning to a soft NZ production outlook.
We stick with $4.50/kg for this season, but note the dairy price recovery’s long road ahead.

Report prepared by:

Nathan Penny, ASB Rural Economist
Phone: +64 9 448 8778
Email: nathan.penny@asb.co.nz

The circuit breaker that dairy markets have long needed is now in hand.  Market focus has shifted from dairy’s global glut to a potential fall in NZ production this season. 

As a result, we expect the prices to recover much of the preceding three auction’s lost ground.  But from there, further lifts become more difficult.

In that respect, the auction lift reinforces our relatively optimistic $4.50/kg milk price forecast for this season.  But it doesn’t alter the medium-term picture materially.  On that front, we now expect a more gradual recovery and have lowered our 2016/17 forecast to $6.50/kg accordingly, and this forecast’s risks still point down.

Read the full PDF Report

Important Disclaimer - The views expressed herein are those of the authors and are based on information believed but not warranted to be correct. Any views or information, whilst given in good faith, are not necessarily the views of ASB Bank Limited and are given with an express disclaimer of responsibility and no right of action shall arise against any of the authors, ASB Bank Limited or its employees either directly or indirectly out of any views, advice or information.
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