Market Takes The Scenic Route
ANZ agri economist Matt Dilly looks at the impressive run of global dairy prices this year.
The GDT Price Index rose a hefty 6.7%, the largest increase of the five consecutive gains. Prices are up a cumulative 18.8% from the late November lows.
Steel says BNZ’s $6.25/kgMS forecast may be a bit low and those forecasting $6/kgMS are likely to revise upwards. The result was stronger than expected, Steel told Dairy News.
“We wondered if demand may be temporarily disrupted by Chinese new year celebrations bringing some price consolidation; not so.
“Indeed demand appears to have strengthened with decent price gains despite more supply.
“The bigger than expected price gains might also reflect some concern about late season NZ milk supply as it becomes drier than usual in some areas.
“This is important at the margin even if NZ milk production for the season as a whole will be well up on last year. More generally, the overarching fundamental of subdued global milk supply continues to underpin price gains, with strong price gains in the major products.”
Whole milk powder prices rose 8.4% to an average price of US$3027/tonne.
“We had $3000/t forecast by May so the gains have come a bit earlier than expected but still along the lines of our broader view,” says Steel.
“It puts upward pressure on Fonterra’s milk price. Our $6.25/kgMS forecast might be a bit low. Those picking $6 are likely to revise their views higher.
“On our calculations, recent auction results support a milk price at least toward the top of Fonterra’s forecast $6 to $6.30 range if not above it.”
Last week’s result at least removes a negative for the Reserve Bank.
“Whole milk powder prices are back above the Bank’s medium-term view of US$3000/t for the first time since June last year. It is another factor arguing against a rate cut.”
Key results
AMF index up 5.8%, average price US$5579/t
butter index up 4.2%, average price US$4445/t
BMP index down 3.1%, average price US$3158/t
Ched index up 1.4%, average price US$3565/t
LAC index up 1.3%, average price US$1035/t
RenCas index up 10.9%, average price US$5596/t
SMP index up 3.9%, average price US$2534/t
SWP index not available, average price not available
WMP index up 8.4%, average price US$3027/t.
