Market Takes The Scenic Route
ANZ agri economist Matt Dilly looks at the impressive run of global dairy prices this year.
Last week's Global Dairy Trade (GDT) auction saw the price index rise 1.1% to US$4380/metric tonne. The whole milk powder price rose 1.7$ to US$3928/MT.
According to Cristina Alvarado, head of dairy insights at NZX, broader market sentiment may also be influenced by growing supply-side risks.
Europe faces mounting challenges from extreme heat in key production regions and the emergence of cattle diseases, such as Lumpy Skin Disease. On top of this, the US administration's renewed threat of 30% tariffs on European products, adds another layer of uncertainty to forward supply and trade dynamics, she says.
"With the New Zealand season just beginning and these GDT contracts aligned to peak spring deliveries, the auction confirmed that solid demand remains in place - particularly in the forward curve - despite current global volatility," says Alvarado.
She says despite seasonal expectations for a softer result, demand held firm.
The results exceeded market expectations, particularly when compared to implied changes from the SGX-NZX Dairy derivatives market.
Of the main commodities, only AMF landed near forecast, with a 0.8% increase versus a 0.7% implied gain. Stronger than anticipated demand was led by Southeast Asia/Oceania, which lifted its overall share of GDT purchases of 25% compared to the previous event - accounting for 34% of the total product sold, just shy of North Asia's 35%.
North Asia remained the top buyer of WMP and butter, while Southeast Asia/Oceania took the lead for SMP, AMF, and cheddar - repeating the same regional buying split seen at the previous event.
China's latest production figures, down 4.1% year-on-year for May, alongside persistently low WMP inventories (down 72% YoY), help explain North Asia's ongoing demand.
