WP.. NZD – Noted that we have advised that Fonterra may cut their 2015-2016 milk payout to levels lower than 2014-2015.”Immediately after the last dairy auction we revised our forecast for this season’s farmgate milk payment to dairy farmers to $4.30 per kg of milksolids. But over the past week we have observed yet another sharp drop in dairy futures prices, and we have had a chance to thoroughly assess the outlook. It is looking increasingly likely that we will reduce our farmgate milk price forecast below $4.00. Open Country, a smaller dairy processor, has already come out with a forecast of $3.65 to $3.95.” Key dates will be next dairy auction on Aug 4th with Fonterra meeting on 7th August. Note MNI Sophia Rodrigues making the following comments this morning – The blow to New Zealand’s economy from the earlier-than-expected peaking of the Canterbury rebuild and the plunge in dairy prices indicate the output gap may now be negative, raising prospects for further monetary policy easing.
The result could be multiple official cash rate cuts, especially if the New Zealand dollar fails to weaken further in line with the declining terms of trade. Key note speech on Tues evening from RBNZ Wheeler at 22.00 to Chambers of Commerce. Key to shorts the downtrend line from late April with stops growing above 0.6670-75. Personally look for any retrace 0.7325-60 as an opportunity to sell again.