Is New Zealand becoming too reliant on China as a customer for primary product exports?
“There were aggressive price increases (6-11%) for near-term delivered WMP, which highlights that some buyers are currently short of product, having been sitting on their hands awaiting higher seasonal volumes from New Zealand,” he says.
“If peak NZ seasonal flows disappoint in any way, then there could well be further gains to come, especially with low carry-over inventory from 2016-17 and the market already primed for a circa 3% lift in 2017-18 supply.”
Elsewhere, things were a touch softer, with skim milk powder (-4.5%), anhydrous milk fat (-3.5%) and cheese (-3.2%) all declining. SMP prices have been pressured by offshore dynamics, with the European Commission trying to move some of its large stockpile at lower prices and previously quarantined US product being released, Williams says.
BNZ senior economist says Doug Steel says the second consecutive marginal fall was within the bounds of the bank’s expectations.
Most product prices fell by a few percent, with butter and wholemilk powder the main exceptions. Butter was steady (at a very high level) and WMP rose 2.6% to an average price of $US3111/t.
“WMP prices remain close to the RBNZ’s US$3000/t medium term view, but the strength of milkfat prices (butter prices have doubled over the past 12 months) adds a positive hue.
“GDT volumes are seasonally starting to rise, but the 28,574 mt sold at this auction was still 12% lower than a year ago.
“Overall, there seems nothing here to change anyone’s views on the dairy market overall.”
Current product prices are tracking higher than required to achieve the bank’s $6/kgMS milk price forecast for the 2017-18 so there remains upside risk to that, Steel says.