ASB Raises Milk Price Forecast to $9.20/kgMS, Eyes Potential Record-Breaking Season
Source: DairyNews.today
ASB has become the first bank to project a milk price above $9 per kilogram of milk solids (kgMS) for the current dairy season. Senior economist Chris Tennent-Brown announced the bank’s revised forecast, raising it by 60 cents to $9.20/kgMS. This puts the industry within striking distance of the record $9.30/kgMS payout from the 2021-22 season.
Tennent-Brown pointed out a shift in the Global Dairy Trade (GDT) market, with the contract curve for whole milk powder (WMP) prices flattening. Previously downward sloping, the curve now shows stable average winning prices above US$3,500 per metric ton (MT) across all contracts and products through the key part of the season.
“Dairy prices have surged compared to last year, and we believe Fonterra should have secured most of this season’s U.S. dollar hedging at rates comparable to last year’s US$0.6120,” said Tennent-Brown. “This strengthens our confidence in Fonterra’s decision to lift its milk price forecast range. As a result, we are raising our own forecast by 60 cents to $9.20/kgMS. While it would be exciting to see the previous record of $9.30 broken, we will wait for further price movements before making that call.”
The economist also emphasized the importance of Fonterra’s ability to manage its product mix in light of current market trends. “We are not alone in anticipating a decline in whole milk powder prices as the season progresses, as is typically expected. However, contrary to this expectation, prices have remained high, and we hope Fonterra can capture as much of the elevated value in other products as possible.”
While acknowledging the risks inherent in any forecast, Tennent-Brown affirmed ASB’s confidence in predicting a farmgate milk price that falls in the upper range of Fonterra’s guidance, with a midpoint above $9.
“Dairy prices have surged compared to last year, and we believe Fonterra should have secured most of this season’s U.S. dollar hedging at rates comparable to last year’s US$0.6120,” said Tennent-Brown. “This strengthens our confidence in Fonterra’s decision to lift its milk price forecast range. As a result, we are raising our own forecast by 60 cents to $9.20/kgMS. While it would be exciting to see the previous record of $9.30 broken, we will wait for further price movements before making that call.”
The economist also emphasized the importance of Fonterra’s ability to manage its product mix in light of current market trends. “We are not alone in anticipating a decline in whole milk powder prices as the season progresses, as is typically expected. However, contrary to this expectation, prices have remained high, and we hope Fonterra can capture as much of the elevated value in other products as possible.”
While acknowledging the risks inherent in any forecast, Tennent-Brown affirmed ASB’s confidence in predicting a farmgate milk price that falls in the upper range of Fonterra’s guidance, with a midpoint above $9.