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A growing number of analysts think dairy prices will start to trend higher after low prices burn off some export competitors and China stocks sink

Rural News
A growing number of analysts think dairy prices will start to trend higher after low prices burn off some export competitors and China stocks sink

Some analysts are coming to the view that dairy commodity prices might start rising later in the year.

ANZ, Danone, and Rabobank have all recently opined that a turn in prospects may be due.

Their views come even though the early 2015 boost proved temporary and has been followed by another sharp downturn.

ANZ said that, for the second quarter "any sharp recovery in dairy prices looks unlikely", citing "cautious sentiment" among buyers who seem to be well stocked.

"Many buyers appear to have disappeared from the market," ANZ said.

"With adequate [supply] cover, they can afford to take a wait and see approach," they said.

The removal of European Union milk production quotas this month would spur a rise in the region's output and cast further questions over any upturn.

"Upward momentum"

But ANZ also noted current prices are above the low levels we saw in late 2014 in the GlobalDairyTrade auctions. These slightly higher levels are despite Fonterra adding some modest volumes to the auction offer levels.

In fact they go on to say "by the second half of 2015, more upward momentum for whole milk powder prices is likely to take hold as global inventories fall."

They think values for whole milk powder are "forecast to trade higher in the second half of 2015".

They see lower farmgate milk prices in other exporting countries "start to bite ... slowing supply and helping rebalance the dairy market".

Chinese demand to return

French dairy giant Danone also thinks prices will recover later this year, and they also think it will be a return of China demand that will spur the change.

"The recent evolution of supply and demand is still showing that there would be a rebound between the third-fourth quarters and the beginning of next year," Cecile Cabanis, the Danone finance director is reported to have said.

"We expect that the Chinese imports will start again, and they will create more pressure on demand, hence have an impact on prices," Cabanis said.

Rabobank agrees

Rabobank last month forecast price "will start to rise from the third quarter, gaining more momentum in the October-to-December period". Rabobank's change in tone was the first to sniff out a coming rise in prices.

Three analysts views in themselves won't turn any markets but all are astute observers.

Price improvements in the October quarter won't come in time to 'save' the 2015/16 Fonterra payout level or payout levels for any other dairy company.

But the prospects of improving prices on the horizon should help the dairy industry with the knowledge that better prices are a realistic possibility within the next year.

Dairy prices

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These analysts have a lot to answer for. This time last year they were saying $7.50, yet it looks to be $4.50. Have they stood up and said "this is why we got it horribly wrong, and this is how we are improving." No they have not. I know some farmers that got themselves in a tight spot because they listened to the so called 'astute observers.' Talking up the future is good for business if you're a bank.


skudiv, There is a formula that you can apply to gdt prices to give you what they are actually returning. Your mates would be wise to get it from their accountant - as I know some accountants do have it. Bank managers should be viewed a sales people - nothing more.

There is going to be volatility in prices - big swings and big lows. Anyone buying dairy land should run a 'stress test' budget at $5.50.

Economists make predictions on payout based on gdt prices. However, it is not the only thing that goes in to a payout price. e.g. At the time the interim accounts were announced 30cents of the Fonterra payout came from forex gains. So in reality the core business is producing 30c less than announced payout. Forex losses are what Synlait said has caused their reduction in payout. Then there are things like the losses Fonterra has been accumulating in Australia in the last few years. Again these are not a consideration in economists predictions. To rely on an economists prediction of payout is folly.


Looking at GDT prices alone has proven to be folly, factors not considered as I see it, the US is ramping up production, the EU is ramping up production, China is importing less and Russia is importing less. China and Russia are increasing domestic production. One of my neighbours has struggled since he brought in 2008, and his bank, was telling him last year a $7 budget was very conservative LOL.

However my point was that this time last year everyone was forecasting a much higher payout, nowdays they have all the explanations for why it is low, like dairy price cycles, inventory build in China etc. it's all so obvious now. My question is why take these same people seriously when they got it so wrong? It's hardly unique to dairy of course, but this is a pretty current example of how it's all just hype, and the abysmal failure of the experts disappears into the media memory hole. Somebody should hold these people accountable, as opposed to lauding their work and promoting their propaganda.


I agree that $5.50 is the norm. should be more but that's where it should pitch around on todays' market, without oversupply pressure. Be a few years yet before we'll see it. We always get a seven year peak, followed by a drop too. That's the buy cycle for the expansion of some of our bigger customers, which ties in with the other development cycles of their businesses.

the costs exclude D&A, tax, interest and drawings, obviously half the farms are even worse.


Supply in Europe is still ramping up and demand is dropping in China (availablility of money, so any sales will only be cheap).


I hope better dairy prices on the way, we are paid enough for this ssst.

Relief milker put the milking herd in the same paddock as older dried off cows this morning. You know, the ones that have been dry long enough to wear off their markings.

IF my records and the MINDA database is 100% accurate I've managed to separate them again.

Just waiting for QCONZ to check tonights bulk milk to give me an all clear for the penecillin.... if not I've got a random dry cow penecillin cow in my milking herd and I'm going to have to dump all production until she's found and won't be able to cull anything for 30 days minimum.


Gutted for you cowboy. Even if it's all fine the stomach churning stress that such incidents put you through is hard to take.
Hope it worked out.


Thanks for the positive thoughts folks.
QCONZ confirmed that bulk vat is clear after milking.
4 in total animal identified in herd (thanks to good receords that were double checked and updated! just 3 days prior).

Thing that gets me...
When you lock the cows away after milking...make sure there are cows in the paddock!!

If the boss calls you when he's standing the paddock with the cows, and you're on the phone, Don't try to tell him you put the cows back in the right paddock.

Don't insist that you did everything right and that you put them back in for the second break, when he's standing in the second break telling you it hasn't been touched and SMS's you photos.

The correct thing to do is apologise. a lot. and swear never to do it again.
Fortunately for me the person was external contractor and not part time employee.


Aw hell Cowboy good luck with that.