Welcome to the Dairy Analytics Milk Price Forecast Model. We're going to try and predict the Fonterra Farmgate Milk Price for the 2016/17 Season.

We think the final farmgate milk price will probably end up between

# \$/90 and \$/10

but if you tried to pin us down, our best guess is

# \$/50

• info_outlineHelp! What do the grey slash things mean?

If you're wondering what the "/50" things mean, go read this FAQ question. If you can't be bothered, it's the probability that the final price is greater than the dollar figure. For example, \$5.43/50 means we think there is a 50% chance that the final price will be \$5.43 or greater.

• info_outlineHelp! Can you explain the graph please?

In the graph above, different colours represent different forecasts made by different people over time. The y-axis (that's the up and down vertical one) represents the final 2016/17 Fonterra Farmgate Milk Price (FMP). The x-axis (that's the flat one along the bottom) is time (left is the past, right is today).

1. 1. Our 80% Chance is where we think there is an 80% chance the final milk price will end up in (i.e. between our \$X/10 and \$Y/90 guesses).
2. 2. Our 50% Chance is where we think there is an 50% chance the final milk price will end up in (i.e. between our \$X/25 and \$Y/75 guesses).
3. 3. Our Best Guess is where we think there is a 50/50 chance of the milk price being higher or lower than (i.e. our \$X/50 guess).
4. 4. AgriHQ is the latest seasonal prediction from the AgriHQ Farmgate Milk Price Calculator.
5. 5. ASB is the latest prediction from ASB's Rural Economic Notes.
6. 6. BNZ is the latest prediction from BNZ's Rural Wrap.
7. 7. Fonterra is the latest public forecast from Fonterra.
8. 8. NZX:MKPFU17 is the last daily settlement price from the NZX 2016/17 Farmgate Milk Price Future.
9. 9. Westpac is the latest prediction from the Westpac Bank's Fortnightly Agri Updates.

#### Previous Seasons

We're going to take a look at what people have forecasted previously, and whether they were any good.

There is such little data that you shouldn't blame someone for one poor season. If I'm still running this thing in 10 years time and they've been poor every year? Thats a different story.

Fonterra

Here's a graph of the forecasts that Fonterra has published over time since the 2009/10 season. The final point of each line is the actual end of season farmgate milk price. The dark blue line is our product weighted average price (i.e. the revenue Fonterra earns per Tonne of Milk Solids). The Farmgate Milk Price is related to this line, but it has a few more complicated things associated with it like the USD:NZX exchange rate achieved by Fonterra, as well as Fonterra's cash, capital, and lactose costs.

While some years (like 2012/13) Fonterra's early forecasts were pretty close to the final price. Other years (like 2009/10 or 2014/15) were less accurate. The spot price only goes back to mid-2010. Before this the GDT auction had less products and calculating a spot price from it gets a bit shakey.

So what does it tell us for this season? To be honest, not a whole lot, but it is a nice picture.

The 2015/16 Season (\$3.90)

Very low auction prices through July and August led to a downgrade by all forecasters. A brief recovery occured during September and October before prices fell again. Fonterra did well by holding off following the price surge, capping its forecast at \$4.60 compared to the \$5.30 figures of AgriHQ and Westpac.

The 2014/15 Season (\$4.40)

Coming off the back of the record 2013/14 season, initial high expectations for the 2014/15 season were quickly dashed. Did Fonterra hold out on high forecasts in the hope that prices would recover? AgriHQ did well by quickly and repeatedly downgrading their forecasts with every drop in the GDT auction.