ASB Farmshed Economics Report

Friday, 19 September 2014, 3:25 pm
Press Release: ASB Bank

ASB Farmshed Economics Report

Mixed fortunes for long term commodity prices

• ASB revises its milk price forecast down to $5.30/kg of milk solids
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• Beef prices could hit record high by year’s end.
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• Lamb price gains running out of steam
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The dairy markets can’t seem to catch a break, according to the latest ASB Farmshed Economics Report.

“With bumper production driving down prices, the recent Russian dairy import ban will further add to the sluggish dairy price woes,” says ASB’s Rural Economist Nathan Penny.

“With this in mind, we have revised down our milk price forecast to $5.30/kg of milk solids, which is a 50 cent reduction from our forecast a month ago.”

This special quarterly edition of the Farmshed Economics Report takes a look at what is driving the long-term prospects for our main commodity prices.

“Because we’re caught in a flurry of dairy price drops, it’s easy to lose sight of the cyclical factors at play. Factors driving down prices like a bumper production season in both NZ and Europe and softening Chinese demand are temporary and we expect to see prices at least start higher in the 2015/16 season.”

As a contrast, the outlook for beef continues to surprise with prices heading towards record highs.

“Tight supply in the US beef market, which is showing no immediate signs of fading, is continuing to drive up beef prices which are now rapidly closing in on record highs, “Mr Penny says.

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Conversely, price gains in the lamb market are beginning to move into balance with a slowing of annual price growth over the last few months.

“The UK sheep industry is having a good season and its domestic lamb production growth is constraining further price lifts. And, although tight supply both here and in Australia will keep prices on the up, future gains will be at a slower rate that we have recently seen.”

“While the cyclical boost to stellar lamb prices appears to be running out of steam, the factors driving beef prices still have gas left in the tank. Beef prices are set for an extended run to potentially hit record levels,” Mr Penny says.

ENDS

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