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Rabobank forecasts farmgate milk price of $7.60kg/MS for new dairy season

Dairy commodity prices have shaken off the past year’s uncertainty, rising strongly over the first few months of 2021. And with global supply and demand fundamentals set to support continued robust dairy commodity pricing over the coming year, New Zealand dairy farmers can look forward to another bumper farmgate milk price in the 2021/22 season, according to a new report by agribusiness banking specialist Rabobank.

In its recently-released New Zealand Dairy Seasonal Outlook – A Note of Caution Amid Optimism, Rabobank says world markets remain supportive of strong dairy commodity prices, with economic growth improving around the globe, foodservice channels beginning to re-open and high feed-grain prices ensuring producers’ margins remain tight globally, helping to keep milk production growth in check.

“In this price rally, Rabobank anticipates demand to remain in the driving seat, with the strength of new season’s forecasts dependent on Chinese import demand,” RaboResearch Senior Analyst Emma Higgins said.

In consideration of these factors, Ms Higgins said Rabobank is forecasting a farmgate milk price of NZD $7.60/kgMS for the 2021/22 season.

“This would provide the third year of a milk price in the NZD 7 range and a fifth year of profitability for most New Zealand dairy farmers,” she said.

“We do however, suggest some level of caution for what lies ahead. We’ve seen recently how quickly dairy markets can turn in either direction, and we expect to see increased dairy commodity pricing volatility moving forward.”


RaboResearch Senior Dairy Analyst Emma Higgins

The report says the global macro-economic outlook is now far more positive than it was a year ago at the onset of the Covid-19 pandemic.

“The IMF is forecasting global economic growth of six percent in 2021 and 4.4 per cent in 2022 and this growth will help to hold up dairy demand,” Ms Higgins said.

“We also anticipate the impact of wide-spread vaccination programmes will kick in by the middle of the year, helping to jump-start the food service channel in key regions and providing another boost to demand.”

While the global demand outlook remains healthy, Ms Higgins said Chinese import demand firmly remains the most significant consideration for the New Zealand farmgate milk price in the coming season.

“We anticipate Chinese demand will lift by two per cent in the first half of 2021, as lingering freight concerns and high local milk prices incentivise imports and drive volumes. However, we are less optimistic for import demand over the second half of 2021, and we see import volumes easing through the second half of 2021 due to elevated inventory levels, improved freight conditions, modest consumption growth at best, and continued expansion plans for the national Chinese dairy herd,” she said.

“And with over a third of New Zealand dairy shipments in 2020 heading to the Chinese market, the magnitude of this demand pull-back will play a key role in where the new season farmgate milk price ends up.”

The good news for New Zealand dairy producers, Ms Higgins says, is that global milk production growth over the coming year is likely to be constrained, helping to lessen the impact of lower Chinese import demand.

“Rising feed costs across the globe, and the resulting margin pressure, will limit supply growth across the rest of the year,” she said.

“We forecast global milk production growth of just 1.1 per cent in 2021 — lower than the 1.6 per cent recorded last year — and this modest production increase should ensure a soft landing for prices following the anticipated fall in Chinese demand.”


Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of about 10 million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 32 offices throughout New Zealand.

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Rabobank New Zealand
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