BNZ with what they expect for Fonterra milk prices
In summary from the note:
- we expect world prices for NZ's major primary export products to be flat to mildly higher in 2019 albeit with variation across individual products.
- We expect something similar for prices in NZ dollars, given the benign outlook we have for NZD.
- The clear downside risk to this view is ongoing disturbance in global financial markets foretelling of a sharper world economic slowdown than currently anticipated. This would most likely see softer international pricing, although the NZ dollar would be expected to weaken and soften the blow to domestic farmers in that scenario.
- But assuming an orderly economic slowing offshore, we see the combined positives of structurally improving food demand in China and some supply tightness as enough to generate some price improvement. There will also be some initial benefits from the CPTPP trade pact filtering through this year
