Wednesday, 13 February 2019 09:42

May the good times continue — Editorial

Written by 
Since November 20, 2018, dairy prices have risen. Since November 20, 2018, dairy prices have risen.

OPINION: Volatility? What volatility? Farmers are asking as global dairy prices rose for the fifth consecutive Global Dairy Trade (GDT) auction last week.

Since November 20, 2018, dairy prices have risen; more importantly whole milk powder prices, used by Fonterra as a benchmark to set the milk price, rose a whopping 8.4% to exceed US$3000/tonne.

The GDT price index rallied 6.7% from the previous auction three weeks ago. 

The average price was US$3265/t versus US$3057/t three weeks ago. Some 23,326t of product was sold, down from 27,909t three weeks ago.

What’s behind this golden mini-run?

Firm demand from Asian countries is likely to have helped to support prices. 

And they are boosted by the EU starting to sell warehouse-loads of skim milk powder amassed in the last few years. 

The EU had subsidised its farmers by paying them above market prices for their milk, but then storing it as skim milk powder until conditions improve.

The lift in the GDT price index and WMP prices has prompted banks to lift their forecast price predictions for the season. 

They now predict $6/kgMS to $6.50/kgMS, close to the revised $6-$6.30 range Fonterra forecast in December.

Farmers will be pleased with the recent spate of price hikes, given that prices dropped last year over seven auctions before recording a lift.

Economists had long been expecting the price decline to reverse but the pace and extent of this improvement is a grand surprise. Why shouldn’t they rise more if the recent lift in demand persists?

However, some economists are cautious. There’s a risk that the pace of growth in Chinese demand for dairy products could slow as China’s growth cools generally; and if New Zealand milk production kept growing strongly it would keep a lid on prices.

NZ is set for a 2018-19 season production growth forecast of 5%, meaning the season is comfortably on track to set a record. 

For farmers, there is now hardly any bad news on the horizon: production is booming and recent GDT results have overshadowed most downside risks to the forecast payout.

Everyone is confident the industry will see the milk price well exceed $6/kgMS this season. May the good times continue.

More like this

$7-plus still on the cards

Despite four consecutive drops in Global Dairy Trade (GDT) prices, analysts are sticking with a payout of around $7.20/kgMS for this season.

Is China back?

There was a silver lining to the fourth straight drop in global dairy prices last week: demand in China is recovering.

Dairy fundamentals looking good

Independent economist Cameron Bagrie says dairy fundamentals are looking pretty good, despite the GDT dropping in the past three auctions.

Featured

Winning comes easy

The 2020 Hawkes Bay/Wairarapa Dairy Industry Awards Share Farmer of the Year winners Nick and Rose Bertram are no strangers to success.

 

Raw milk supplier ploughs on

It's business as usual for Timaru raw milk suppliers Stuart and Andrea Weir as the country is in total COVID-19 lockdown.

» The RNG Weather Report

» Latest Print Issues Online

Milking It

Vegan milk service hits UK

OPINION: In March, the first national dairy-free milk delivery service will be coming to British doorsteps, a clear sign that…

Red seaweed 

Farmers in Australia are experimenting with adding seaweed to cattle feed in order to stop cows producing as much methane.

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter