March 4, 2025 • 6 mins
Rabobank's Senior Ag Analyst reviews the GDT auction and the bank's latest Q1 Dairy Quarterly Report which sees a revision of the milk price forecast to $10.
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Speaker 1 (00:00):
Good Global Dairy Trade auction result overnight, even though it
went down zero point five percent. We're going to talk
about that with Emma Higgins Rabobank Senior agg Analyst, and
also about her latest offering, the Q one Global Dairy
Quarterly Report, and we'll get the drum roll ready for
Emma's new milk forecast price for this season. But before
(00:24):
we do that, Emma talk to me about the GDT auction.
I reckon that was a good result.
Speaker 2 (00:29):
Yeah, I think the same Jamie as well. So yeah,
sure that index moved back lower by half a percent. Sure,
but on picking some of those results, we actually saw
some glimmers of optimism when we look at Skim milk partner,
which lifted by something similar and we're now looking at
two thousand, seven hundred or just above that Urestolers per
(00:49):
Ton to Skim, So that's glimmers of optimism. But actually
again when we also look through the numbers, BUTA prices
reached a new cord once again. And I think last
time I was talking to you, we we were talking
about a couple of months ago or a couple of
weeks ago, the fact that butter prices had had new records,
and now what seems to have happened overnight is the
(01:10):
average butter price is now sitting above US seven five
hundred bucks a ton, which according to my calculations, looks
like another record has been had. So those two factors
around Skerm and butter have helped to stop what could
have been a poorer performance overall. So I'm taking that
in some total as a positive result for our New
(01:32):
Zealand farnment.
Speaker 1 (01:33):
This auction obviously was after you'd completed your Q one
Global Dairy Quarterly report. Would it have changed anything?
Speaker 2 (01:43):
No, I think it underpins what we are talking about.
So and Nicole lead with it first, Jami, because they
know you're going to ask me, what's checkening. Were aim
at price forcast, so look, we are moving it up
in line to wear Fonterra sitting now at tim Bucks
before when we reset their forecasts at the end of
last year, we had a nine dollars seventy milk price forecast,
(02:05):
which was sitting slightly higher than where Fonterra was at
that pohen in time, so we were expecting to see
some upside come through, and I think we've obviously seen
that in terms of some of the volatility upwards, which
has been good for in New Zealand farmers, and so
we are in line with Fonterra. I think if we
take a step back, there's a lot happening. There's a
lot of volatility out there, there's a lot of uncertainty
(02:26):
and global markets. We think that on the supply side,
we think that modest growth is set to emerge across
this year and into next year as well, and that's
because most farmers are making money now. Sentiment is probably
the highest here in New Zealand, but elsewhere in the
length of the US and parts of the EU, and
(02:47):
then also in Brazil as well, we're seeing healthier margins
and we think that's going to translate into more milk supply.
If we look across onto the demand side, we are
expecting to see an improvement come out of our major
exporting region, China through importing region China, but ultimately we're
still cautiously optimistic around what might happen there over the
(03:11):
coming weeks and months, just because there's still some challenges
within some of the aspects that we look at that
comes to demand within China, and that's why we're sitting
still at ten dollars. There's a lot that can happen
between now and the end of the season though, and
we have seen in the past that when China jumps
into the market, prices can surge. And the watching point
(03:34):
to that, Jamie, is that milk supply in China is
turning around and potentially turning around quite quickly.
Speaker 1 (03:41):
So what about our domestic production here, because we know,
particularly the North Island's getting very dry. At ten dollars,
you can afford to buy supplementary feed, poke it in
one end of the cow and outcomes some milk from
the other end. It's a wonderful mathematical equation. As Trump
would say, it's a beautiful thing. It is a great
and wonderful thing. We'll come back to Trump. But are
(04:01):
we going to see milk production fall off in this country?
Speaker 2 (04:06):
Look, I think there is a risk of that. We
know that certain parts of the country haven't received meaningful
rain in the last three while, and we've just seen
some drought declarations being made more recently in parts of
the Northland. But there is a risk of that happening
if farmers look to conserve cow condition and basically try
(04:27):
and draw the line and ensure that they heard is
in a really good shape for the new season. The
risk on the flip side, obviously, is what you've just
talked about, where economics do support perhaps some looking to
pump a little bit more feed into the system to
get them through. So I think it's a risk. For now,
we are expecting se milk production land somewhere between two
(04:49):
and a half and three percent for the full season,
which is a really good result for the twenty four
to twenty five season, and the great part of that
is that the market is still absorbing all this e
shre milk production.
Speaker 1 (05:01):
Okay, I was just going to finish on Trump and
ask you what you think about him and as tariffs,
but literally, we have no idea.
Speaker 2 (05:09):
Look, we're getting headlines every day, right we wake up
and there's something new that's coming out of the United States,
which is quite frankly exhausting. I think obviously it's a
watching piece here, right because what I'm in particular watching
for Jamie is what might happen with interest rates, because
I think that's the big one, and that's something that
(05:30):
we can actually delve into a little bit more. Because
we know that the US Federal Reserve has mentioned that
it will take its time potentially on the next interest
rate decision and that could have bearing for what happens
here in New Zealand as well. So that's really the
focal point for me in the short term because obviously
the cost of funds is important piece for our dairy
(05:52):
farmers and for agriculture as well. So yeah, a lot
of headlines coming out very quickly constantly as well. It
is a moving feast and we'll do our best to
keep ourselves updated on this, but for now, interest rate
for the biggest one for us.
Speaker 1 (06:06):
A moving feast or a dog's breakfast, I'll let you decide.
Emma Higgins, thank you very much for your time as
always on the country and well done. I'm getting the
ten bucks, thanks Jamie.
Good Global Dairy Trade auction result overnight, even though it
went down zero point five percent. We're going to talk
about that with Emma Higgins Rabobank Senior agg Analyst, and
also about her latest offering, the Q one Global Dairy
Quarterly Report, and we'll get the drum roll ready for
Emma's new milk forecast price for this season. But before
(00:24):
we do that, Emma talk to me about the GDT auction.
I reckon that was a good result.
Speaker 2 (00:29):
Yeah, I think the same Jamie as well. So yeah,
sure that index moved back lower by half a percent. Sure,
but on picking some of those results, we actually saw
some glimmers of optimism when we look at Skim milk partner,
which lifted by something similar and we're now looking at
two thousand, seven hundred or just above that Urestolers per
(00:49):
Ton to Skim, So that's glimmers of optimism. But actually
again when we also look through the numbers, BUTA prices
reached a new cord once again. And I think last
time I was talking to you, we we were talking
about a couple of months ago or a couple of
weeks ago, the fact that butter prices had had new records,
and now what seems to have happened overnight is the
(01:10):
average butter price is now sitting above US seven five
hundred bucks a ton, which according to my calculations, looks
like another record has been had. So those two factors
around Skerm and butter have helped to stop what could
have been a poorer performance overall. So I'm taking that
in some total as a positive result for our New
(01:32):
Zealand farnment.
Speaker 1 (01:33):
This auction obviously was after you'd completed your Q one
Global Dairy Quarterly report. Would it have changed anything?
Speaker 2 (01:43):
No, I think it underpins what we are talking about.
So and Nicole lead with it first, Jami, because they
know you're going to ask me, what's checkening. Were aim
at price forcast, so look, we are moving it up
in line to wear Fonterra sitting now at tim Bucks
before when we reset their forecasts at the end of
last year, we had a nine dollars seventy milk price forecast,
(02:05):
which was sitting slightly higher than where Fonterra was at
that pohen in time, so we were expecting to see
some upside come through, and I think we've obviously seen
that in terms of some of the volatility upwards, which
has been good for in New Zealand farmers, and so
we are in line with Fonterra. I think if we
take a step back, there's a lot happening. There's a
lot of volatility out there, there's a lot of uncertainty
(02:26):
and global markets. We think that on the supply side,
we think that modest growth is set to emerge across
this year and into next year as well, and that's
because most farmers are making money now. Sentiment is probably
the highest here in New Zealand, but elsewhere in the
length of the US and parts of the EU, and
(02:47):
then also in Brazil as well, we're seeing healthier margins
and we think that's going to translate into more milk supply.
If we look across onto the demand side, we are
expecting to see an improvement come out of our major
exporting region, China through importing region China, but ultimately we're
still cautiously optimistic around what might happen there over the
(03:11):
coming weeks and months, just because there's still some challenges
within some of the aspects that we look at that
comes to demand within China, and that's why we're sitting
still at ten dollars. There's a lot that can happen
between now and the end of the season though, and
we have seen in the past that when China jumps
into the market, prices can surge. And the watching point
(03:34):
to that, Jamie, is that milk supply in China is
turning around and potentially turning around quite quickly.
Speaker 1 (03:41):
So what about our domestic production here, because we know,
particularly the North Island's getting very dry. At ten dollars,
you can afford to buy supplementary feed, poke it in
one end of the cow and outcomes some milk from
the other end. It's a wonderful mathematical equation. As Trump
would say, it's a beautiful thing. It is a great
and wonderful thing. We'll come back to Trump. But are
(04:01):
we going to see milk production fall off in this country?
Speaker 2 (04:06):
Look, I think there is a risk of that. We
know that certain parts of the country haven't received meaningful
rain in the last three while, and we've just seen
some drought declarations being made more recently in parts of
the Northland. But there is a risk of that happening
if farmers look to conserve cow condition and basically try
(04:27):
and draw the line and ensure that they heard is
in a really good shape for the new season. The
risk on the flip side, obviously, is what you've just
talked about, where economics do support perhaps some looking to
pump a little bit more feed into the system to
get them through. So I think it's a risk. For now,
we are expecting se milk production land somewhere between two
(04:49):
and a half and three percent for the full season,
which is a really good result for the twenty four
to twenty five season, and the great part of that
is that the market is still absorbing all this e
shre milk production.
Speaker 1 (05:01):
Okay, I was just going to finish on Trump and
ask you what you think about him and as tariffs,
but literally, we have no idea.
Speaker 2 (05:09):
Look, we're getting headlines every day, right we wake up
and there's something new that's coming out of the United States,
which is quite frankly exhausting. I think obviously it's a
watching piece here, right because what I'm in particular watching
for Jamie is what might happen with interest rates, because
I think that's the big one, and that's something that
(05:30):
we can actually delve into a little bit more. Because
we know that the US Federal Reserve has mentioned that
it will take its time potentially on the next interest
rate decision and that could have bearing for what happens
here in New Zealand as well. So that's really the
focal point for me in the short term because obviously
the cost of funds is important piece for our dairy
(05:52):
farmers and for agriculture as well. So yeah, a lot
of headlines coming out very quickly constantly as well. It
is a moving feast and we'll do our best to
keep ourselves updated on this, but for now, interest rate
for the biggest one for us.
Speaker 1 (06:06):
A moving feast or a dog's breakfast, I'll let you decide.
Emma Higgins, thank you very much for your time as
always on the country and well done. I'm getting the
ten bucks, thanks Jamie.
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