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El Nino fizzer

Key highlights

Dairy prices dipped for the third successive auction overnight, as expected.
As surprisingly good NZ weather supports milk production so far this summer.
We stick with our 2015/16 milk price forecast of $4.10/kg for now.
 

Report prepared by:

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


Summary:

This El Niño is looking like a fizzer.  Most parts of the country have had good rain this summer.  Indeed green is the countryside’s summer colour of choice, even in areas like the East Coast where brown is normally the summer vogue.

The good NZ growing conditions over summer have come as a surprise.  Weather analysts had labelled this El Niño as one of the strongest in recent memory.  And, we had thought the low milk price combined with a dry summer would slam the brakes on NZ milk production.  Instead, good growing conditions now mean the NZ production slowdown is happening at a more gradual pace.

In an oversupplied global dairy market, gradual is not fast enough.  While we maintain a positive long run dairy view, the lower prices go in the short term, the harder it gets to reach our milk price forecasts.  As a result, we place both our 2015/16 and 2016/17 forecasts under review.  
 

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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