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.
At the overnight auction, the GDT Price Index rose 1.9%; whole milk powder (WMP), butter and cheese prices were the big drivers for the 8th price rise in a row.
Rabobank’s dairy analyst Emma Higgins notes that butter pushed past the US$5000 mark, with a 9.3% lift to US$5,089/tonne – a price not seen since middle of last year.
WMP nudged up a healthy 4% to US$3,317/tonnes.
Underpinning price increases lies the risk to milk collections over the tail of the season, she says.
“Fonterra have pulled back their forecast milk collections for the 2018/19 season for the second time in recent weeks as dry conditions take hold – particularly in pockets of the North.
“Buyers will be looking to procure volumes before production trails off and the seasonal hiatus takes place until next season.
“The risk for apathetic buyers waiting in the wings is that the season could end sharply should no meaningful rain emerge over the final weeks of March for hot spots in need.”
Skim milk powder was down 2.4% to US$2,405/tonne.
“We are seeing a recalibration of SMP prices after almost reaching US$2,600/tonnes in February 2019 in the aftermath of the EU SMP intervention stocks selling down.
“The market is now digesting EU intervention stocks: sold on paper and now moving physically through the supply chain,” she says.
Favourable weather in Europe has been reported for the first few weeks of spring and weekly milk collections continue to improve in key production regions.
Higgins says buyer focus will remain on New Zealand over the next couple of GDT Events, before attention turns sharply to the Northern Hemisphere spring peak.
Key results
AMF index down 3.1%, average price US$5,662/MT
Butter index up 9.3%, average price US$5,089/MT
BMP not offered
Ched index up 3.9%, average price US$4,036/MT
LAC index down 1.0%, average price US$1,000/MT
RenCas index up 9.7%, average price US$6,190/MT
SMP index down 2.4%, average price US$2,405/MT
SWP index not available, average price not available
WMP index up 4.0%, average price US$3,317/MT
