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.
“We have been expecting China’s import growth to seasonally slow, combined with our expectation that inventory pipelines are full,” Higgins told Dairy News.
She was commenting on the final GDT Event last week for the 2018-19 production season. The GDT price index dropped 1.2% to US$3414/tonne. It ended a good run of 11 positive GDT Events since December 2018, says Higgins.
WMP prices moved lower by just over 2% to US$3180/t. Skim milk powder saw a small lift of 0.5% to US$2529/t.
“This was a good result given that more SMP was on offer for this GDT Event by 17% on prior forecasts and the last GDT Event. Oceania SMP prices are leading international prices, with NZ product retaining a premium over both European and US product.”
Fats dived. AMF results were lower by 1.4% to US$6140/t. Butter was softer by 3.2%, landing at an average price US$5297/t.
“Despite this, Oceania butter is still priced ahead of US and EU product. Part of the recalibration of fat prices seen in this GDT Event comes down to the affordability of European product compared to Oceania butter, in particular.
“The other factor is that the northern hemisphere season is well underway, with reports of improved milk flows from earlier in the year….
“We are moving into the quieter months for NZ production and therefore fresh product for the GDT. Any major price movements over the next GDT Events will be influenced by the urgency of buyers looking to obtain product over NZ’s seasonal hiatus period.”
She notes EU milk production for March 2019 was higher by 1.1%. This brings total EU milk production for the first quarter 2019 to a small decline of -0.1% year on year.
BNZ senior economist Doug Steel says the small decline at last week’s event was in line with expectations and “fits with our broader view that prices will drift lower over coming months”.
“Not all prices fell. Cheese bucked the trend with a massive 15.2% gain [from already elevated levels] and casein prices also rose strongly,” he notes.
