Weak supply keeping prices high
Weaker milk production in the Northern Hemisphere is keeping dairy prices high.
Whole milk powder (WMP) prices were largely unchanged (down 0.2%) after big moves in the three previous auctions.
ASB senior rural economist Nathan Penny says in view of the recent price surge, it is not surprising that dairy markets wanted to catch their breath. WMP prices, for example, have spiked 35.1% over August and September.
ASB is reaffirming its 2016/17 milk price forecast of $6/kgMS.
“However, the result was significantly below expectations heading in. Futures market pricing hinted at a circa 10% WMP lift prior to the auction.
“Aside from the WMP result, prices were firm. SMP, AMF and butter all lifted by between 3.0% and 4.6%. Indeed, seven out of eight products on offer recorded price gains.
“From here, we expect prices to consolidate over coming auctions as markets will need to take stock. In our view, we expect continued production weakness prices to lift prices again later in the season. On that basis, we look to NZ spring data that support or challenge our view that there is further global production weakness to come over 2016.”
Key results
AMF index up 4.6%, average price US$4,998/MT
Butter index up 3.6%, average price US$3,892/MT
BMP index up 7.0%, average price US$2,276/MT
Ched index up 2.2%, average price US$3,518/MT
LAC index up 3.7%, average price US$815/MT
RenCas index up 2.0%, average price US$6,893/MT
SMP index up 3.0%, average price US$2,293/MT
WMP index down 0.2%, average price US$2,782/MT
