Rabobank flags rising global dairy prices, warns of downside risks ahead
While global dairy commodity prices continue to climb in most key exporting countries, the second half of the year is expected to bring increased downside risks.
This coincides with Fonterra last week revising upwards its production forecast for the full season versus last season to -2% (from -3% previously) to 1.5billion kgMS.
While New Zealand product pricing now tends to wane as focus turns to the northern hemisphere, the late spring retains demand for fresh skim milk powder (SMP), says Higgins.
SMP lifted 3.6% last week and NZ product is still selling for more than European product.
ASB’s Nathan Penny says the WMP fall contrasted with its expectations. However the sharp move lower in the NZ dollar more than compensates for the fall. Since the last GDT auction the NZD versus USD has fallen about 4.5%.
The net affect sees overall dairy auction prices about 3% higher in NZ dollar terms – the terms that matter for the farmgate milk price.
Fonterra’s Global Dairy Update released last week says NZ dairy exports in February increased 4% (11,000t) on the same month last year.
Growth was again driven by WMP and fluid and fresh dairy, up a combined 12% (16,000t) for the month, slightly offset by declines in cheese, lactose and AMF.
Exports for the 12 months to February were flat on the previous comparable period, it said.
Exports of fluid and fresh dairy and WMP -- both among the largest export categories, and up a combined 117,000t (7%) -- this was offset by declines in most other categories. – Pam Tipa
