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Kicking the recovery can down the road

Key highlights

Fonterra has lowered its 2015/16 milk price forecast by 25 cents, bringing it into line with our $3.90/kg forecast.
In response, Fonterra has hinted that additional cashflow support for farmers may be possible.
Meanwhile, Fonterra maintains its confidence in long-term dairy demand – a view we share.

Report prepared by:

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


Fonterra trimmed its 2015/16 milk price by 25 cents to $3.90/kg of milk solids. This move was in line with our earlier revision to $3.90/kg made back in February.

The revision follows weak prices over February. Dairy markets remain over-supplied and weak global market sentiment spilled over into dairy markets. Notably, though, market sentiment has since improved and dairy prices have begun March on a better note.

However, our long-run dairy view remains positive. Current low prices are unsustainable both locally and abroad, and as producers respond to low prices in earnest, prices will lift later in the year. Accordingly and with an already lower NZD in play, we continue to expect the milk price to lift to $6.00/kg next season. 

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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