Milk Glut Drags Fonterra Forecast Down to $9.20/kgMS
A milk glut around the world shows no sign of easing, putting downward pressure on farmgate milk prices for the next few months.
The whole milk powder index up 4.9% to an average price of US$3,593/MT and there’s a suggestion it may go to US$4000/MT in the New Year.
ASB’s senior rural economist Nathan Penny says with another firm result in the bag, there is clear upside to our $6/kgMS 2016/17 milk price forecast.
For now we stick with $6/kgMS, but the forecast remains “under review”, he says.
The relative WMP strength reflects the market’s ongoing reaction to the rapid decline (from an already weak position) in NZ production. Prices for WMP, NZ’s key product, have surged around a third over the last four auctions, while SMP prices, in contrast, have jumped 18%.
“In our view, WMP prices may have further to go, and may challenge US$4,000/MT in the New Year. In particular, we expect the data on NZ and EU production are set to get worse before they get better.
“For example, we expect NZ production to fall 5% over the season as a whole from the 3.1% decline for the season to date. Also, we expect flat production in the EU this calendar year, which is less than official EU forecasts of a small rise.
Other event results were:
• AMF index up 2.9%, average price US$5,500/MT
• Butter index up 1.7%, average price US$4,262/MT
• BMP index down 2.6%, average price US$2,408/MT
• Ched index up 2.2%, average price US$3,752/MT
• LAC index up 10.6%, average price US$873/MT
• RenCas index up 2.3%, average price US$6,201/MT
• SMP index up 1.4%, average price US$2,570/MT
Full results on www.globaldairytrade.info
