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Production down 5, milk price forecast up to 5

Key highlights

Auction prices spiked higher again overnight, lifting by more than expectations.
We expect milk production to fall 5% this season; recent auction volume reductions are distracting from this weak production picture.
As a result, we lift our milk price forecast to $5.00/kg for the season.

Report prepared by:

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


The second leg of the dairy price trifecta is now looking increasingly likely.  Namely, NZ dairy production is set to fall hard this season.  We expect a 5% production fall this season compared to last.

In particular, farmers have culled and continue to expect to cull aggressively this season, leading to an overall fall in the dairy herd size.  Moreover, spring growing conditions have also been generally weak and supplementary feed is being used sparingly.

As a result of this substantial supply fall, we expect prices to kick on from here over the rest of the season.  And factoring this into our milk price forecast we shift up to $5.00/kg from $4.50/kg previously.

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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