There’s not much of a case for reducing farmgate milk prices in the coming season, according to Rural Bank’s February Update.      

Global dairy prices continue to lift with the GDT Index 17% above prior year and Fonterra New Zealand recently lifted its forecast payout milk price to NZ$10kgMS, up from an opening of NZ$8kgMS.

At the same time supply is under pressure. Dry conditions across Australia’s largest milk producing state Victoria persisted through summer with milk production tracking lower year-on-year. The bank notes drought in Victoria’s west has led to consistently lower year-on-year production every month this season, except for July and August which are low production months. Meanwhile, this season’s winter crop  exceeded expectations at 57.7mt with national output mixed across states. Northern Australian growers are reluctant to sell wheat at current prices—no urgency from neither buyers and sellers. Meanwhile, dry conditions in southern parts of mainland Australia is driving demand feed.