New Zealand forecasts point to tentative dairy price recovery

Dairy prices could see some improvement in the next 12 months, according to forecasts from New Zealand.

Canterbury milk processor Synlait has unveiled a higher milk price forecast for the 2015-16 season, which runs from June to the following May.

The new rate was NZ$5.50/kg milk solids (£2.56), compared with the current 2014-15 price for NZ$4.40-4.60 (£2.05-£2.14).

See also: Dairy doldrums as market drop his milk price

Synlait managing director John Penno said the market would remain fragile in the immediate future, with global oversupply met by soft demand.

“We are confident commodity prices will recover over time and our 2015-16 forecast milk price assumes we will see the beginning of this recovery from the current low prices,” he said.

Synlait’s announcement follows similar news from co-operative Fonterra a fortnight ago.

The top dairy exporter’s forecast milk price for 2015-16 was NZ$5.25/kg milk solids (£2.45). This compared with a 2014-15 rate of NZ$4.40 (£2.05), before any dividend payout.

Fonterra chairman John Wilson said he expected to see a rebalancing of supply and demand over the season, with prices recovering.

“However, it is more difficult this early in the season to determine exactly when this recovery will lead to a sustained price improvement,” he said.

The forecasts contrast a run of poor results on the Global Dairy Trade auction, the key benchmark for NZ and world prices.

Six successive drops at the fortnightly auction have wiped out all gains made since mid-December and the market average is at its lowest since August 2009.

Latest figures from the EU also suggest milk supplies are unlikely to dry up soon.

The top 10 European dairy nations could grow production by almost 1.5bn litres a year in 2015 and 2016, according to data presented at the latest Milk Market Observatory meeting.

German production is expected to rise 1.3% this year and 1% in 2016, with French output predicted to grow by 0.5% this year and 1% next year, and UK supplies to increase 1.5% this year and 1% in 2016.

Ireland is expected to see the biggest growth, with milk production forecast 4% higher on the year for 2015 and another 3% in 2016.

A DairyCo report said most of the increases would come in the later part of the year.

“The prospect of more milk could keep pressure on prices for the foreseeable future, subject to a significant upturn in buyer demand or any potential impact of weather/disease.”

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