Wednesday, 17 July 2019 10:03

Dairy prices rise after four straight drops

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Dairy prices ended their recent slide in last night’s GlobalDairyTrade auction, with the price index lifting 2.7%.

With the last four GTD auctions recording a drop in prices, last night’s positive results would be good news for farmers.

Prices rose for most products on offer, including a solid 3.6% increase in whole milk powder prices.

Westpac senior economist Anne Boniface notes this was the first lift in whole milk powder prices since March: there were smaller improvements in fats prices.

Boniface says global growth in milk supply is still expected to be relatively modest over the second half of this year. 

“While much will depend on pasture conditions in New Zealand, it’s unlikely that last year’s exceptionally strong growth in milk production during spring will be repeated. 

“And with the national herd likely to be static, or even contract a little, further growth in the national milk supply will hinge on incremental productivity improvements.”

One crucial development to keep an eye on is how Chinese demand evolves in the coming months. 

Buying from the North Asian region (dominated by China) has been strong through the first half of the year. Most recently, the proportion of GlobalDairyTrade sales to the North Asian region has been notably higher than usual through June and July. 

Boniface says this suggests that consumer demand for dairy products in China seems to be holding up well, despite growing headwinds for the Chinese economy and trade tensions.

“While last night’s GlobalDairyTrade auction was a little stronger than we had pencilled in, we remain comfortable with our $6.90 milk price forecast for the current season,’ she says.

Key results

AMF index up 1.7%, average price US$5,523/MT

Butter index up 1.7%, average price US$4,406/MT

BMP not offered

Ched index up 3.3%, average price US$3,869/MT

LAC index not available, average price not available

RenCas index down 3.4%, average price US$7,044/MT

SMP index up 3.8%, average price US$2,505/MT

SWP index not available, average price not available

WMP index up 3.6%, average price US$3,074/MT

More like this

$7-plus still on the cards

Despite four consecutive drops in Global Dairy Trade (GDT) prices, analysts are sticking with a payout of around $7.20/kgMS for this season.

Is China back?

There was a silver lining to the fourth straight drop in global dairy prices last week: demand in China is recovering.

Dairy fundamentals looking good

Independent economist Cameron Bagrie says dairy fundamentals are looking pretty good, despite the GDT dropping in the past three auctions.

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