Westpac NZ Raises Milk Price Forecast Amid Positive Dairy Market Sentiment

Penny attributed the improved outlook to several factors. Firstly, the lower dairy prices have rekindled buyer interest, prompting increased market activity. Secondly, the dairy market is factoring in the potential impact of El Niño, anticipating drought conditions over the upcoming summer and autumn. Lastly, the recent upswing in oil prices has resulted in heightened demand from Middle Eastern buyers.

The revised forecast sees Westpac NZ raising the milk price by 50 NZ cents to NZ$7.25 per kg milk solids. However, Penny maintains a cautious stance, expressing the need for clearer signs of improved Chinese demand. While recent economic data suggests a positive trend, caution remains until sustained demand is confirmed.

Fonterra, a major player in the New Zealand dairy industry, has also adjusted its 2023-2024 season forecast milk price range, reflecting a similarly optimistic outlook. CEO Miles Hurrell acknowledges the encouraging uptick in demand seen in recent Global Dairy Trade events but remains watchful of sustained Chinese demand and cautious forward purchases from other key regions.

Despite these positive indicators, senior analyst Michael Harvey of Rabobank Australia notes that New Zealand milk production is trending below average for the early months of the 2023-2024 season. RaboResearch anticipates a slowdown in milk supply growth over the coming months, with a cautious market rebalance.

RaboResearch has adjusted its 2023 milk production forecast for the Big 7 export regions, projecting a modest 0.3% year-on-year growth. The outlook for 2024 suggests a marginal increase of 0.4%, below the historical average. The report emphasizes the possibility of a whiplash effect, wherein increased demand outpaces global milk output recovery, potentially leading to a bullish market in 2024.