Flooding brought on by Cyclone Cook and Cyclone Debbie over the last few weeks has pushed dairy prices up.
Dairy prices rose for a third consecutive time at the latest Global Dairy Trade auction overnight, lifting 3.1 per cent.
A 3.5 per cent increase in whole milk powder (WMP) prices to US$2998 (NZ$4255) a metric tonne boosted overall prices, which also saw gains in butter, skim milk powder and cheddar.
Westpac senior economist Satish Ranchhod said the recent very poor weather had raised concerns about production, which likely led to the price lift.
READ MORE: * Rabobank expects stable dairy prices to give farmers healthy margins * New Zealand’s main dairy export takes a dive at Global Dairy Trade auction * Forecast lift in milk production sees dairy prices fall
He expected a farmgate price of $6 per kilogram of milksolids (kgMS) this season, in line with Fonterra’s guidance last month, and $6.10/kgMS next season.
“Although prices remain lower than the levels that we saw in early 2017, they appear to have found a floor and in recent weeks and are still 52 per cent above the levels we saw this time last year.”
Last month, the price for WMP had plummeted 12.4 per cent to US$2782 a metric tonne, and overall dairy prices fell 6.3 per cent.
But ASB said it now saw some upside to the forecast $6 price, after Cyclones Cook and Debbie stymied an otherwise strong end to the country’s production season.
ASB said this fall in production had been offset to an extent by a longer season, but the impact of the flooding could extend into the next season.
“With production stymied, prices have lifted modestly at this auction and at the last one.
“However, given the likely small production impact and also the fact that the majoring dairying regions have escaped the worst of the flooding, the relatively modest price rise feels about right.”
ASB said the results reaffirmed its $6.75/kgMS expectation for next season.
“The saving grace for dairy is that it has come late in the season and the majoring dairying regions have escaped the worst of the production impacts.
“That is cold comfort to some areas though.
“Dairy farmers in the Bay of Plenty, for example, will be counting the cost of the twin cylcones well into next season.”