NZX forecasts $6.76/kg milk prices for 2019-20 season

Market analyst company NZX has revised its milk price forecast down for the 2019-20 season, after this week's drop in global dairy commodity prices.

Global dairy commodity prices fell for the third consecutive time in the latest Global Dairy Trade (GDT) event on June 18.

Average prices were US$3,208/t, with the GDT price index down 3.8 percent.

NZX dairy analyst Robert Gibson said the milk price forecast for the 2019-20 season had eased to $6.76kg of milksolids (MS). 

"This follows a decline in dairy commodity prices across the board at the June 18 Global Dairy Trade (GDT) event and a slightly weaker outlook for commodity prices for the rest of the 2019-20 season," he said.

However, he pointed out that it was still very early in the season. 

"Forecasts at this point of the season are largely based on the outlook for commodity prices rather than actual commodity pricing," said Gibson. 

"The $6.76/kg MS that NZX is forecasting is well within Fonterra's $6.25 - $7.25/kg MS range."

The drop in commodity prices at the GDT event was led by a decline in whole milk powder (WMP), which fell by 4.3 percent.

Gibson said regular grade WMP to ship in August dropped 5.2 percent. 

"WMP futures trading on the NZX Dairy Derivatives market have fallen from where they were a fortnight ago." 

"Participants expect WMP prices to remain below US$3000/t for the majority of the season." 

The NZX spot price had plunged 68 cents to $6.98/kg MS. 

The spot price indicates what the milk price would be if June 18 GDT prices were achieved over the entire dairy season at current exchange rates.