Wednesday, 27 March 2019 09:25

Tight supply, solid demand

Written by  Pam Tipa
Emma Higgins, Rabobank dairy analyst. Emma Higgins, Rabobank dairy analyst.

Whole milk powder, butter and cheese prices were the big drivers of the eighth bounce in a row for the Global Dairy Trade (GDT) last week, says Emma Higgins, Rabobank dairy analyst.

The overall price index was up 1.9%.

Positive results for farmgate milk price purposes included butter pushing past the US$5000/tonne mark in a 9.3% lift to US$5089/t, a price not seen since mid 2018, says Higgins. 

Whole milk powder (WMP) nudged up a healthy 4% to US$3317/t. 

“Underpinning price increases lies the risk to milk collections over the tail of the season,” she told Dairy News.

“Fonterra has pulled back its 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 tails off and the seasonal hiatus takes place until next season.” 

Skim milk powder (SMP) was down 2.4% to US$2405/t. 

“The market is now digesting EU intervention stocks, sold on paper and now moving physically through the supply chain.” 

While favourable weather in Europe has been reported in the first few weeks of spring, 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.  

BNZ senior economist Doug Steel says the GDT has made a cumulative 26.2% gain since November last year. 

“To us, the overall price increase reflects generally tight global milk supply and solid demand (the number of unsatisfied bidders remains elevated),” Steel says. 

“This result will again have forecasters discussing upside [prospects for] milk price forecasts. On our calculations, if current conditions persist a milk price in the top half of Fonterra’s $6.30/kgMS to $6.60/kgMS range is likely. 

“Current global prices also set up a better milk price for next season, although we would be a little wary of extrapolating current product price strength right across next season as a whole.” 

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