Economist confident dairy commodity prices will hold

A senior rural economist is confident a lift in global dairy commodity prices will continue.

Commodity prices lifted 6.7 percent to US$3265/t at the February 6 Global Dairy Trade (GDT) event.

The index has continued to increase since the December 5 GDT event in 2018, which was the first rise in seven months. 

ASB senior rural economist Nathan Penny told Magic Talk's Rural Exchange that it's been a good run since the December auction.

"It's enough for us to lift our own milk prices forecast," he said. 

"We were sitting at $6 per kilo and we were getting worried we may have had to go lower towards the end of last year," said Mr Penny.

However he said things have turned around.

"These months of solid gains that seen us bump it up to $6.25 per kilogram, and that is towards the top end of Fonterra's range of $6-$6.30 per kilogram."

Nathan Penny said things are looking positive.
Nathan Penny said things are looking positive. Photo credit: Newshub

"Given we are fairly well advanced into the season, we are likely to end on a pretty good number, once the season is done and dusted in May."

Nathan Penny said around 20 percent of milk product is sold through the Global Dairy Auction, and 80 percent off auction.

"The auction is enough to get a fair reflection on what world prices are doing and the rest is sold directly to customers."

Meanwhile he told Rural Exchange the rural sector in general appears to be doing well.

"I have heard the heat has started taking its toll on some animals, but there is plenty of feed  - and the dairy season has been a generally good one

He said dairy production had been running at 5 percent ahead of last season.

Lamb and beef have also been doing reasonably well

"Farmers aren't having to ship off lambs too early this season."

Watch the full interview with Nathan Penny

Hamish McKay and Richard Loe host Rural Exchange, 6-8am Saturday and Sunday on Magic Talk with Carter's Tyre Service.