Some optimism for GlobalDairyTrade prices

Dairy prices are expected to rise again tomorrow morning when the next GlobalDairyTrade auction is held.

Prices had risen in the last two auctions. Headline GDT prices are up 6.1% in the last month, although they remain down 8.8% year-to-date and 12% below last year's levels. Futures are pointing to another small increase in dairy prices this week.

BNZ senior economist Craig Ebert said current market indicators, amid an increasing sense of global commodity price recovery, including in food, suggested another gain at this event.

By itself, this would start generating some upside risk to the bank's $4.60 milk price forecast for 2016-17.

‘‘In this vein, note that 2016-17 milk price forecasts are now fully sensitive to the GDT dairy auctions. This is not only because the forward contracts roll forward a month but also because the immediate auctions have relatively less product to sell. So while the debate might soon be couched around how much higher will the 2016-17 milk price be compared to 2015-16's $3.90 - a potential positive for dairy sector sentiment - it will probably not be without ongoing frustration and risk along the way.''

Even if international dairy prices did wobble their way back up, tabs would need to be kept on where the New Zealand dollar travelled, he said.

It was worth recalling the currency largely offset the increases in prices over the past couple of GDT auctions, he said.

In the last GDT auction, the dollar was at US70c.

To complement this week's GDT auction, the ANZ commodity export price indices for March would be released at 1pm tomorrow.

A slight rise was anticipated in world price terms, driven by some improvement in the categories of forestry and aluminium.

But export prices in New Zealand-dollar terms terms were prone to decline, courtesy of the Kiwi's TWI strengthening in March, Mr Ebert said.

At noon tomorrow, the Quotable Value NZ housing report is expected. Because its price index was lagged, it was slow reflecting inflation pick-up.

‘‘The QVNZ report's anecdote, as usual, will be most useful, especially in affirming how generalised the house price inflation is becoming now,'' he said.

Labour market data will be released tomorrow morning.

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