Westpac has upgraded its 2021-22 farm-gate milk price forecast by 75c to $8.50, citing the significant downgrade to its production forecast for the season.
If achieved, that would be a record high, surpassing the previous record of $8.40 set in 2013-14, senior agri-economist Nathan Penny said in the bank’s latest update.
The bank previously expected production to lift by 1% but it now expected it to fall by 1% compared to last season. It had started the season ‘‘on the back foot’’ and winter and spring had been either wet or cold or both in many parts of the country.
Production for the first three months of the season was running 1.8% behind the same stage of last season and that production softness was expected to continue in the short-term.
‘‘Most of the weakness to date was concentrated in August, which came in 4.2% below August 2020. Anecdotes also suggest that September will be similarly weak.
‘‘With the first four months of the year accounting for around 20% of the season’s production, it will be very difficult for production to be made up later,’’ he said.
Dairy production elsewhere was also soft. Weather had affected European production which, for the first seven months of the year, was down 0.1% compared to the same time a year ago. Chinese and United States production continued to be constrained by very high feed costs and limited feed availability.
Recent auction results also reflected the slowdown in global dairy production. Overall and wholemilk powder auction prices had lifted by about 5% since August.
In this week’s GlobalDairyTrade auction, prices were largely unchanged. Whole milk powder prices fell 0.4% while overall prices were flat. The result was weaker than expectations. Futures market pricing was signalling a WMP price lift of 2%.
ASB has retained its $8.20 Fonterra milk price for the season. Economist Nathaniel Keall said farmers could be confident of a farm-gate milk price above the $7.54 they received last season.