Dairy price rise: will farmers finally make a profit?

Dairy farming (iStock)
Dairy farming (iStock)

The gloom may be lifting over dairy farms with forecasts that farmers could actually make a profit.

A strong rise in this week's Global Dairy Auction has seen forecasters AgriHQ lift their predicted milk price payout to $5.46/kg of milk solids.

"If we can get back above that 5 dollar level it gives farmers an opportunity to make a profit this season which would be a huge relief after two years of loss making on the farms," says AgriHQ analyst Susan Kilsby.

The estimated breakeven price for farmers is $5.05/kg and Fonterra's current forecast payout is only $4.25 for the 2016/17 season.

Ms Kilsby says it's being driven by a supply and demand combination.

She says a decrease in supply from Europe along with the off season in New Zealand and Australia means there is less milk on the market.

"On the demand side we are seeing an increase in interest mainly from the Asian buyers out of China and other parts of Asia."

The AgriHQ forecast is based on the futures markets for milk.

Ms Kilsby says they do see the market jump around a lot and it's possible the market may have got ahead of itself a little bit.

"We do have to be a little bit cautious at this time of year, it is very early on in the season, but the market is feeling a lot better than it did a month ago."

Whole milk powder prices jumped 18.9 percent at the last dairy auction and Fonterra is expected to review its milk forecast payout in September.


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