One fall does not a winter make

People wagering on iPredict are putting their money on a fall in Fonterra payouts for this season and the next one.

Forecasts for Fonterra’s 2011/12 and 2012/13 payouts have fallen following last night’s 10% plunge in prices on the company’s global dairy auction system.

According to the 6000 registered traders on New Zealand’s online predictions market, iPredict, the 2011/12 payout per kilogram of milk solids (before retentions) is now likely to be $674, down $0.07 from the $6.81 forecast when iPredict last reported on Monday.

The 2012/13 payout forecast has been harder hit, and is now just $6.14, down $0.35 or 5.4% from the $6.49 forecast on Monday.

Federated Farmers is also warning of a possible drop in the forecast price for next season:

World wide demand for milk products remains steady despite a 9.9 percent price index fall on the GlobalDairyTrade online market. Federated Farmers agrees with Fonterra this reflects the current abundance of milk being produced around the world.

“Almost ideal growing conditions around most of New Zealand this season has seen a record amount of milk production and a corresponding increase in products on the market platform,” Federated Farmers dairy chairperson Willy Leferink says.

“There is also more milk coming from the United States and Europe at the moment, meaning there is an abundance of milk products going through GlobalDairyTrade.

“This month alone there has been a 10 percent increase in volumes on the platform, so a price drop was not unexpected.

We will have to watch what happens over the next few months, but with Fonterra already having revised down it’s payout by 45 cents to $6.30 per kg of milk solids, New Zealand dairy farmers should begin preparing for a potentially lower milk price forecast for the 2012-13 season.

“However, the price of whole milk powder indicated by GlobalDairyTrade represents just one day on the market.

“This is a volatile market with many factors influencing it. One thing which could have a big effect on global dairy production over coming months is the very strong beef prices at the moment, which could sway production towards the meat rather than the dairy side of the equation.

“New Zealand’s dairy industry is very resilient and used dealing with small downturns while looking to the long term picture, which is very rosy indeed,” Mr Leferink concluded.

One price fall, even a 9.9% one, doesn’t mean we’re in for wintery market conditions, but it does show the need for caution with budgeting for the coming season.

It might also have a moderating influence on price rises for land, wages, supplies and services.

 

 

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