Westpac Sees Upside Risks To Full Season Milk Price Forecast
The local bank weighs in on the latest dairy auction, noting the strong result poses upside risks to its milk price forecast for this season. See below for full details.
Westpac: "Last night's dairy auction was one of the strongest in years. Overall prices were up 5.5% and Whole Milk Powder rose 7.2%. There is upside risk to our $8.40 Milk Price forecast for the season.
Prices rose strongly more or less across the board driven by the continued return of Chinese buyers in the Whole Milk and Skim milk products. Futures markets had indicated a strong auction was in the offing and were right. This was the strongest auction we have seen since 2022.
If prices can sustain these levels, then the upside risks to our 2024/25 milk price forecast of $8.40 are firmly back in play. We will be looking for Fonterra to provide an update on their current $8 guidance with an expectation this will lift at least a bit.
We need to be a bit careful about extrapolating recent price trends. The reality is auction participation by the Chinese has been hit and miss and price volatility has been significant. Nevertheless, we now find ourselves with price levels at the top of the range seen this year and noticeably above long-term averages (the GDT index is around 10% above the 10-year average. So, there are some grounds for optimism."