Golden milk price may drop, costs rise
| Published date | 22 June 2022 |
| Publication title | Central Rural Life |
This follows Fonterra’s forecast range of $9.10/kg to $9.50/kg for this season, with a mid-point of $9.30/kg, that’s being matched by Synlait.
Analysts cautiously support the new-season mark despite a mixed bag at the Global Dairy Trade auction and a hazy horizon created by COVID-19, freighting headaches, Ukraine’s invasion by Russia and rampant inflation.
Farmers are watching price lists go up for fertiliser, fuel, agri-chemicals, wages, animal feed and health products, power and winter grazing.
Federated Farmers Dairy North Canterbury chairman Karl Dean said the high payouts were needed to counter the inflationary pressures on farming.
He said rising fuel prices were a real concern with tractors costing $1000 to fill and this was pushing farm inflation close to 1980s levels.
‘‘The skyrocketing price of fuel ... affects every single thing on a farm in terms of expenses. Contractors will have to pass on their costs and it affects every single freighted item.’’
He said the way prices were rising it was possible that a $12/kg price could go on the table, but a drop to $8/kg would be more devastating than in 2014-15 when it went $4.40/kg from $8.40 the year before.
He said that’s purely because every cost had increased.
‘‘I have heard anything up to 15% to 18% for general inflation of costs on a dairy farm and that’s for the season just finished. If fuel prices go up from $3 a litre to what have you then on-farm inflation will rise even more.’’
Last week the futures market had milk prices at $10.40/kg for the 2022-23 season.
Mr Dean said farmers felt sorry for people who weren’t getting wage increases to match the extra prices they had to pay for goods.
If a recession hit in the next year the Government would be forced to place its recommendations for many environmental rules on the back-burner, he said.
Rabobank is still flagging $9/kg for next season’s milk price, with the proviso that this could easily swing either way.
The bank expects prices for dairy commodities will drop moderately in the second half of the year because of weakening demand, even though global milk supply is continuing to wane.
Milk production across the Big Seven dairy producers of Argentina, Brazil, Uruguay, EU, UK, New Zealand and Australia is expected to retreat for a fourth consecutive quarter.
Rabobank senior...
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