Global dairy price recovery continues

Global dairy price recovery continues

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Solid global dairy prices are forecast for 2019/20, on the back of weakening supply growth worldwide and increased demand.

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The recovery in global dairy prices continues with the world benchmark auction lifting again this week.

The Global Dairy Trade price index lifted 1.9 per cent at Tuesday night's auction, with the average price lifting to $US3324 a tonne.

It was the eighth consecutive rise in the index and took the price back to the levels set in June last year.

Pundits are forecasting solid prices for 2019/20, on the back of weakening supply growth worldwide and increased demand.

Australian analyst Fresh Agenda in its latest Milk Price Outlook has lifted its midpoint forecast average southern Australia farmgate milk price for 2018/19 to $6.10 a kilogram milk solids.

This was due to a significant recovery in the underlying commodity milk value (CMV) since late last year, which Fresh Agenda now put in the range of $5.60-$5.70/kg MS.

"Looking ahead to the 2019/20 season, our forecast for the underlying CMV is $5.80 to $6.20/kg MS," Fresh Agenda said.

"We also expect the value capture achievable by companies and paid to dairy farmers on top of the CMV to edge higher, ranging between 45 and 55c/kg MS."

Fresh Agenda said prices had lifted on the back of slowing milk production growth, particularly in the European Union and more recently in New Zealand, and strong demand for low-priced milk powders from China and South East Asia.

It also pointed to the potential for prices to lift above the fundamentals given stronger competition for milk.

New Zealand based analyst Nathan Penny, senior rural economist with ASB, said the company had now lifted its forecast milk price for NZ farmers for 2018/19 to $NZ6.60 a kilogram.

"The 2018/19 season is ending on a high - at least from a milk price point of view," he said.

Mr Penny said the 2019/20 season was shaping up strongly too.

"The global dairy market is tight as global supply is on the whole soft," he said.

"At the same time, demand particularly from Asia, including China, remains firm.

"On this basis as well as the dry NZ conditions, we see upside risk to our already-bullish 2019/20 milk price forecast of $NZ7/kg milk solids."

Mr Penny said a combination of factors pointed to the start of a new dairy price cycle.

"Accordingly, we expect global dairy prices to lift further over 2019," he said.

This story first appeared on the Australian Dairyfarmer website. 

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