ASB Farmshed Economics Report: Sharing the dairy love

Thursday, 22 May 2014, 11:48 am
Press Release: ASB Bank

ASB Farmshed Economics Report: Sharing the dairy love

22 May 2014

• As dairy prices lose a little of their sheen, meat prices are re-gaining some of theirs.
• There is good momentum in the rural land market, despite emerging headwinds like rising interest rates.
• A weaker NZD is proving elusive.

As dairy prices lose a little of their sheen, meat prices, are re-gaining some of theirs, according to the ASB Farmshed Economics Report.

“Compared to the start of the year, the gap between dairy and meat prices has narrowed,” says ASB Rural Economist, Nathan Penny. “Some may call it a changing of the guard, but we prefer ‘sharing the dairy love’.”

Some of the recent lift in lamb prices is cyclical and it won’t last. However, part of the lift in prices is a structural shift.

“The same factors that have lifted dairy prices over the last six or so years, such as rising demand from developing countries like China, are beginning to drive lamb prices higher as well,” says Mr Penny.

As predicted, dairy prices are stabilising. “However, the strong NZD led us earlier in May to revise down our 2015 season farmgate milk price forecast to $7.00 per kg of milk solids.”

Meanwhile, there is good momentum in the rural land market, despite emerging headwinds like rising interest rates and falling dairy prices.

“A weaker NZD is proving very elusive and ASB expects the NZD to remain high against the USD this year, and into 2015,” concludes Mr Penny.

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About Farmshed Economics
Farmshed Economics is a monthly report that gives ASB’s economic take on recent rural developments and includes our outlook for rural commodities and the relevant financial markets. The full report is attached and is available online.

Each quarterly Farmshed Economics will have a special feature on a relevant topic.

If you would like to receive ASB updates and reports by email: https://reports.asb.co.nz/register/index.html

ENDS

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