There were “many moving parts” and the new dairy season was only seven days old, he said, commenting to Dairy News last week.
But overall the outlook is positive for dairy farmer and New Zealand income, he says.
“From a macroeconomic perspective, higher dairy prices is one reason we think NZ’s terms of trade will hit an all-time high in 2017.”
Indications are an upside risk to BNZ’s $6/kgMS milk price forecast for the 2017-18 season.
“Indeed, on our calculations, if current pricing persists for the whole season, something around $7 is possible.
“But we remain wary of more milk production over the coming year (in NZ, EU and US) because recent pricing encourages supply (as does low grain prices). This is expected to weigh on dairy product prices over the coming season.”
The dip in the WMP prices at last week’s auction fits with this thinking.
“We are also conscious of the NZD pushing higher of late, up 3.5% since the previous auction, which, if sustained, would be a negative for milk price computations. On the plus side, demand indicators look solid.