But if the Australian dollar fell from its current level of 71 US cents to the bank’s forecast of 68 US cents, milk suppliers should pick up an extra 20c/kg MS.
In its latest Australian Dairy Seasonal Outlook, Rabobank senior analyst Michael Harvey said the average farmgate milk price of $6.40/kg MS for Australia’s southern export region was based on the bank’s global price forecasts, the current exchange rate, an industry-weighted average product mix and processors’ profit retention and conversion costs remaining at average levels.
“But we recognise there will be prices above that in the market due to retention or recruitment premiums, which comes back to competition for milk,” Mr Harvey told The Weekly Times.
“We know there is going to be some really intense competition (for milk supply).”
Mr Harvey said the strong competition for milk among processors this season was likely to continue into 2019-20, with forecasts of lower national milk production.
Competition for milk is particularly intense in northern Victoria and southern NSW.
Fonterra secretly offered contracts to its larger northern milk suppliers of $6.71/kg MS in February to counter higher prices from Parmalat and Australian Consolidate Milk, just days after announcing a final average farmgate milk price to most of its farmers of $6.05/kg MS.
Fonterra would not be drawn on what its farmgate milk price was likely to be for the new season.
It referred The Weekly Times to its Fixed Base Milk Price system which opened for bids by suppliers last week.
But a spokeswoman pointed to Rabobank’s $6.40/kg MS forecast and Fresh Agenda’s $6.55/kg MS forecast as price indicators for next season to guide farmers in putting in their tenders. “We will announce the clearing price for Fixed Base Milk Price in mid-May, and our season forecast and opening price will follow,” the spokeswoman said.
Bega Cheese chief executive officer Paul van Heerwaarden said it was too early to forecast the company’s milk price for the next season.
“But the global market has strengthened in the past six months,” Mr van Heerwaarden said.
“And we are seeing strong global commodity prices in the first half of next year.”
Saputo Dairy Australia did not respond to The Weekly Times’ requests for comment.