GlobalDairyTrade powder prices up as production forecast falls

Whole milk powder was a strong performer in the latest GlobalDairyTrade auction. Photo: Linda Robertson
Whole milk powder was a strong performer in the latest GlobalDairyTrade auction. Photo: Linda Robertson
Dairy prices were back in the black in the first GlobalDairyTrade auction held early yesterday.

Overall, prices lifted 2.2%, only partially regaining the losses of the closing 2017 auction. Prices of the key whole milk powder product performed the strongest, up 4.2% to $US2886 ($NZ4066) a tonne. Skim milk powder prices rose 1.6% and milk fat prices were steady after dropping at the end of last year.

The price of butter, which has been a major concern for New Zealand households, rose 0.6% to $US4501 a tonne.

ASB chief economist Nick Tuffley said the whole milk powder gains put prices back to mid-October levels, after powder prices ground lower during a period of marked milk fat price weakness.

As always, weather would play a part in influencing New Zealand dairy supply and prices.

''New Zealand had a very wet spring that hampered dairy production. Summer has had a very dry start and, despite a recent sprinkling of rain, soil remains considerably drier than normal in many parts of the country.''

During this period, milk prices had still generally been on the back foot, he said.

The ASB would reassess its milk price forecast during coming weeks. For now, ASB was remaining with is forecast of $6.50 per kilogram of milk solids, Mr Tuffley said.

The GDT price index rose to $US3124. About 25,400 tonnes of product was sold, down from 29,592 tonnes two weeks ago.

AgriHQ dairy analyst Amy Castleton said Fonterra last week announced it now expected its milk intake for the 2017-2018 season to be about 3% lower than last season as parched pasture hit production.

It advised it had started to reduce the volume of whole milk powder available on the GDT platform in response to the reduced outlook for its milk supply.

The reduction of whole milk volume for the latest auction, and subsequent GDT events, led the market to believe a substantial lift in price would occur, she said.

The NZX dairy derivatives market had closed for the new year holiday before Fonterra advised of the lower milk production forecast.

Units in the Fonterra Shareholders Fund, which gives investors exposure to Fonterra's earnings, last traded at $6.41, having gained 6.8% over the past year.


Add a Comment