Economists at the country's largest bank, ANZ, have considerably increased their forecast for the milk price in the current season - and they've had their first shot at picking the price for next season.
ANZ agricultural economist Susan Kilsby has raised her pick for the current season to $7.70 per kilogram of milk solids, from $7.15 previously. This means the ANZ now has the highest price pick among the major bank economists.
And it follows a volatile period in which price picks started high at the beginning of the season, plummeted as global dairy prices plunged, and are now making their way back up again.
Kilsby's new forecast is right at the top of the range of the current official forecast from dairy giant Fonterra.
Fonterra's forecast for the 2023-24 season is for a range of $6.50 - $8.00 per kgMS, with a 'midpoint' of $7.25 per kgMS.
Kilsby's first price pick for next season is $8.50, which if achieved would be the second best ever milk price for Fonterra, though still well shy of the mammoth $9.30 price of two seasons ago.
Kilsby says global dairy demand "is still fragile" but is generally improving.
"Pricing lifted quickly earlier in the season but there has been some sideways movement recently. Positively, prices did not fall as Global Dairy Trade offer volumes lifted, in-line with the seasonal increase in milk production.
"Global dairy commodity prices have improved considerably in recent months, but demand remains delicate. Global milk supplies are growing but only at a modest pace. Most dairy farmers around the globe are struggling financially as the current modest returns are struggling to cover operating costs and service debt," Kilsby says.
She says dairy companies have revised up milk price forecasts but remain cautious. Dairy commodity futures pricing points towards ongoing increases in prices as this season progresses and into next season. The low-valued NZ dollar is helping returns and should continue to do so throughout the forecast horizon.
"Our $7.70/kg MS forecast does assume dairy commodity prices will continue to lift as the season progresses. It also assumes the NZD will remain relatively low. A large proportion of this season’s foreign exchange exposure will already be locked in, either through completed sales, or hedged using futures and options products. Future movements in the NZD will have a larger impact on the 2024-25 season milk price than the price for the current season."
Of ANZ's $8.50 forecast price for the 2024-25 season, Kilsby says there is considerable uncertainty and risk in forecasting this far in advance, "so it is important to take this into consideration when planning ahead".
"A lot could change between now and the end of the 2024-25 season. Milk supplies are expected to remain relatively subdued due to the lack of profitability in dairy farming in the major supply regions. Global economic conditions are expected to gradually improve. The current reforms taking place in China will hopefully improve consumer confidence in this region which in turn should translate into stronger demand for imported products and stronger prices," Kilsby said.