Dairy Rebounds as Meat Market Lags: Insights from Latest ASB Report
Source: The DairyNews
In ASB's recent Rural Quarterly report, dairy prices have surged by 22%, signaling a bullish growth outlook amidst changing monetary expectations. Despite this positive momentum, prices remain approximately 30% below previous peaks.
Nathaniel Keall, an economist at ASB, attributes this optimistic dairy forecast to shifting perceptions regarding monetary policy. He notes a growing market sentiment that interest rates may not need to rise as high, coupled with hopes for a global economic "soft landing." Consequently, traditional "safe" assets like government bonds and the US dollar are losing favor, while "risk" assets like equities and commodities are regaining popularity.
However, recent Global Dairy Trade (GDT) auctions saw a notable absence of Chinese purchases, with the world's largest dairy importer acquiring less than 40% of whole milk powder (WMP) compared to historical averages of 55-60%. Despite this, ASB has revised its milk price forecasts upwards, anticipating a robust $8.30/kg MS for the 2025 season.
In contrast, the red meat market faces challenges, with producers earning approximately 9% less compared to the previous season and up to 21% below the 2022 season. Oversupply, particularly in the Australasian lamb market, has led to sustained weakness in prices, exacerbated by a 13% increase in Australian lamb production.
Forestry prices have also experienced a downturn, primarily due to China's economic slowdown and uncertainties in the Chinese property market. However, ASB predicts modest support from the export market, albeit tempered by the prevailing economic conditions.
Looking ahead, Keall anticipates a more supportive domestic environment, with expected OCR cuts in the latter half of the year likely to bolster house prices by 7-8%. While this growth is slower compared to previous cycles, it is expected to stimulate construction activity and increase domestic demand for New Zealand forestry products.
However, recent Global Dairy Trade (GDT) auctions saw a notable absence of Chinese purchases, with the world's largest dairy importer acquiring less than 40% of whole milk powder (WMP) compared to historical averages of 55-60%. Despite this, ASB has revised its milk price forecasts upwards, anticipating a robust $8.30/kg MS for the 2025 season.
In contrast, the red meat market faces challenges, with producers earning approximately 9% less compared to the previous season and up to 21% below the 2022 season. Oversupply, particularly in the Australasian lamb market, has led to sustained weakness in prices, exacerbated by a 13% increase in Australian lamb production.
Forestry prices have also experienced a downturn, primarily due to China's economic slowdown and uncertainties in the Chinese property market. However, ASB predicts modest support from the export market, albeit tempered by the prevailing economic conditions.
Looking ahead, Keall anticipates a more supportive domestic environment, with expected OCR cuts in the latter half of the year likely to bolster house prices by 7-8%. While this growth is slower compared to previous cycles, it is expected to stimulate construction activity and increase domestic demand for New Zealand forestry products.
