Westpac Pushes Up Milk Price Forecast

The local bank has revised higher its milk price forecast, but still maintains a cautious outlook, see more below.

"We have shifted our 2023/24 milk price forecast up to $7.25/kg."

• "While the recent positive results are welcome, global dairy prices remain at modest levels. Moreover, WMP prices have yet to fully make up the lost ground over. Looking over a longer period, WMP prices sit at 9% below their five- year average. That said, market sentiment has changed, indicating that the worst of this price cycle may be over. Looking at sentiment, three things have helped turned the price tide. Firstly, prices hit very low levels, and this has led to increased buying interest, notably from the Middle Eastern (more below) and European buyers - after all, everyone loves a bargain. Secondly, the declaration of an El Niño weather pattern has increased the risk of a drought and a contraction of supply later in the season. Lastly, oil prices have lifted over recent months, and this may have given further impetus to demand from Middle Eastern buyers. In contrast, we haven’t yet seen a material improvement in Chinese demand. Indeed, Chinese buyers haven’t changed their buyer patterns materially. Similarly, Chinese economic data is also inconclusive at this juncture. On the supply side, the strength or otherwise of New Zealand spring production (supply) also has the potential to provide fresh direction to prices over coming months."