Demand for New Zealand dairy products should remain solid despite China’s mixed economic outlook, says Imre Speizer, Westpac.
He says Chinese demand for dairy has remained firm despite its economic slowdown and the US-China trade war.
“At last night’s auction, North Asia (a reasonable proxy for China) again bought more than half of the total offering, with South East Asia/Oceania buying around a quarter.
“We continue to expect a further loss in momentum in China’s economy into year-end, which should constrain demand somewhat.
“However, over the longer term, its pro-active responses to recent adversities, via monetary policy stimulus, export diversification, and efficiency gains, should pay dividends.”
The Global Dairy Trade (GDT) price index rose 2%.
NZ's key export product, whole milk powder, rose 1.9%, which was close to the 1% gain predicted by WMP futures market, Speizer says.
All major products recorded gains, with skimmed milk powder up 3.4%, butter up 2.7%, and anhydrous milk fats up 0.6%.
“Prices have been fairly stable since the decline in June, the headline index currently sitting at the three-year average.”
Whole milk powder at $3133 is close to the three-year average of $3060. On the supply side, NZ milk production this spring should be decent given soil moisture levels and warmer temperatures (the latter arriving slightly later than usual).
“Against that, global production remains subdued. Our farm gate milk price forecast for 2019/20 remains at $6.50 (we reduced it a few weeks ago from $6.70). That leaves us toward the lower end of Fonterra’s own milk price forecast for this season of $6.25-7.25.”
AMF index up 0.6%, average price US$5,030/MT
Butter index up 2.7%, average price US$4,129/MT
BMP not offered
Ched index up 0.4%, average price US$3,846/MT
LAC index up 5.6%, average price US$770/MT
RenCas index down 0.1%, average price US$6,636/MT
SMP index up 3.4%, average price US$2,599/MT
SWP index not available, average price not available
WMP index up 1.9%, average price US$3,133/MT