Dairy Payout – it’s a now a 7!

The latest Global Dairy Trade auction saw a further small rise in whole milk powder price to around $US 3114/tonne. This follows two small decreases and has seen Fonterra upgrade 2017/18 milk price forecast for the season to $6.75/kg plus about 45-55 cents dividend per shareon shares = total farmgate payout of $7.20-7.30
The graph below here tracks Payout (milk price +  share dividend) since 2000.

After nearly three years of pain it looks like there is now a bright light at the end of the tunnel for payouts.

From my May 2017 forecast story I said:

“At the risk of being labelled crazy I suggest there may be a 7 at the forefront of milk price in the not too distant future. ” based on:

1. Worldwide Milk demand from consumers continues to grow year on year by 1.8-2.0%

2.  which in volume terms is about the same as NZ’s total milk supply.

3. While NZ farmers can increase productivity, it’s fair to assume most of this increase in demand will need to be met by US and European milk producers.

4. Environmental issues are impacting on-farm decisions in NZ and elsewhere. For example the Netherlands are due to start a herd reduction of some 175,000 cows to comply with EU commitments to the environment (and we thought NZ farmers were being harshly dealt with!).

So while some “economists” cast doubt of being able to sustain a $6.50 payout, Economics 101 on Supply vs Demand is pretty simple: where demand is greater than supply (and it is), price will move. Giddyup!

payout history to 2018F

 

 

 

About Robert Dabb

Mobile 027 255 3992
Office 06 323 3363
Home 06 353 0298
Email: robertd@ruralandlifestylesales.com

Robert has been involved in the rural sector his whole working life. This includes as a Farm Consultant, specialising in dairy and a Regional Manager for Fonterra Co-operative Group from 2000 through to 2006 and has been in real estate since then. He holds a Bachelor of Agricultural Science degree from Massey University. With a wide network of contacts across rural industry, he is well positioned to professionally profile rural properties.