Government economists forecasting the national milk price for farmers are taking a more cautious view than Fonterra this season, but still predict it will jump to $7.21/kg of milksolids by the end of the 2014 season.The surge in earnings will be rooted in
Government economists forecasting the national milk price for farmers are taking a more cautious view than Fonterra this season, but still predict it will jump to $7.21/kg of milksolids by the end of the 2014 season.
The surge in earnings will be rooted in a rise of nearly 58% in the value of dairy exports, from a low set by the past season's 16% drop in total dairy export earnings.
The nation's biggest dairy company, Fonterra, has said farmer suppliers can expect a milk price of $6.60/kg in the season to May 2011, plus a dividend payment of between 20c and 35c/kg.
The Ministry of Agriculture and Forestry's analysts -- who yesterday released projections for agricultural earnings out to 2014 -- took a more conservative stance, picking a national milk price of $5.60/kg for the same season, averaged across a series of companies, down from $6.10 for the 2010 season just ended.
They predict that though the price will dip to $5.24/kg in 2012, rise to $6.17/kg in 2013 and $7.21 in 2014.
Over the same period, the total export value for dairy products will climb 57.3% from $9.93 billion in the year to June 2010, to $15.66 billion in 2014, the analysts said today in their Situation and Outlook for New Zealand Agriculture and Forestry.
The ministry said the nation's milking herd would increase from 4.6 million cows to more than 5.02 million by 2014, and the volume of milk solids produced would rise by 21.9% between 2010 and 2014.
A significant part of that boost in production would take place this season, but its value to farmers was predicted to shrink because a global boost in production would increase supply and lower international commodity prices.
By 2014 increased demand and a falling exchange rate should underpin higher payments to farmers, according to the analysts, who are relying on Treasury forecasts that the NZ dollar exchange rate against the US dollar will drop from around US71c to US51c over the same period.
There was a 4% increase in dairy cattle at the start of the 2009-2010 season, but a wet, cold spring and autumn droughts constrained the lift in milksolids production to 3% (1.435 billion kg), meaning the milk yields per-cow actually dropped by 3% in the season to May this year.
But the MAF analysts said the immediate outlook for New Zealand's dairy farmers was positive, as recent gains in prices had lifted the average national milk price and national production was forecast to jump by 14% in the season to May 2011.
Spot market prices for butter, skim milk powder, whole milk powder, and cheese all peaked in December 2009, and export prices were expected to start declining in the three months to December 2010, as global supplies to commodity markets temporarily outpaced demand.
But projected declines in the NZ dollar exchange rates would help farmers. A 15% lift in whole milkpowder (WMP) prices and a 14% lift in volumes shipped would boost the value of WMP by 32% this season.
MAF forecasts the milkprice for the year to May 2011 at $5.60/kg of milksolids, but said favourable exchange rates beyond 2011 would mean export prices slowly rise in US dollar terms.
