National Australia Bank (NAB) Agribusiness is forecasting a slow recovery in global dairy prices in 2016, with ongoing support to local prices to be provided by the weak Australian dollar.
Australian dairy export prices are forecast to rise 3 per cent in 2015-16 to average A$3482/tonne, and the value of Australian exports to increase by 3.2 per cent.
The latest forecasts are available in the NAB Agribusiness Dairy in Focus report, released during International Dairy Week in Victoria.
International dairy markets saw a tumultuous 2015, driven by weaker global demand, particularly from China, combined with adequate supply of most dairy products.
NAB’s regional agribusiness manager in the Murray Valley Dave Davies said that Australian producers were shielded from much of the global dairy price tumult in 2015 by a low Australian dollar, and this was likely to continue in 2016.
“The AUD is already off by more than 5 per cent against the USD since the start of the year and this will provide support to prices," he said.
"The AUD is expected to reach as low 0.66 at the end of Q2 2016.”
NAB sees the currency tracking lower in the first quarter of 2016 and has revised down the AUD/USD forecasts to 0.67 in Q1 2016 (previously 0.68), climbing to 0.69 at the end of 2016 (previously 0.70).
“Australian prices are also likely to be supported by the ongoing international interest in our products," he said.
"Free trade agreements such as the China Free Trade Agreement will only help this trade, especially if we can operate on a more level playing field with the New Zealand industry.
“Dry conditions and water prices are also likely to be key topic of conversation at International Dairy Week, but NAB’s broader outlook for dairy is very positive,” he said.
The NAB weighted dairy export price indicator started 2015 at A$3309.25/tonne, and after some considerable variation, ended a little higher at A$3351.68/tonne.
It is expected to approach A$4000/tonne in the fourth quarter of 2016.
NAB’s measure of dairy export prices, based on Global Dairy Trade (GDT) auction results, is weighted by the quantity of Australian exports for whole milk powder, skim milk powder, butter and cheese.
Agribusiness View provides the latest insights from NAB Agribusiness.