New Zealand Dairy Seasonal Outlook: Batten Down the Hatches

Report summary

- USD Oceania FOB prices have already tumbled over 10% since January 2020, but commodity prices have not yet hit bottom.

- A significant global demand shock will lead to an extended down cycle, with much of the impact anticipated over the first months of the new production season.

- Among the chaos, there is a silver lining for New Zealand dairy farmers. A depreciating currency will cushion some of the blow of falling commodity prices.

- Rabobank is expecting a farmgate milk price for 2020/21 of NZD 5.60/kgMS.

- There are considerable upside and downside forces that will need to be closely monitored in a rapidly changing environment.

- In Rabobank's view, an imminent demand shock warrants a more conservative opening price from New Zealand dairy processors.

- New Zealand dairy farmers should look to batten down the hatches and adjust the new season’s budgets as soon as possible, maximising any ability to strip out unnecessary costs over the coming 12-to-18-month period.