Friday, March 29, 2024

GDT jumps into the new season

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Global Dairy Trade auction prices have opened the new dairy season in New Zealand with a welcome rise in the GDT price index after three months of sustained decreases.

The index rose 1.5%, led by butter up 5.6%, butter milk powder up 4.5%, skim milk powder (SMP) up 3% and anhydrous milk fat (AMF) up 2.7%.

NZX dairy analyst Stu Davison said the mix of results from the latest auction needed explanation.

“A positive event outcome does help to agree with market sentiment; strong bullish tones across the board and underlying demand within the wider markets remains steady.”

While WMP prices rose the price index slipped a little by 0.3%, which he said was the different WMP grades falling back into alignment, regular as the base price and then instant and UHT at slight premiums.

“The tight US$35/t range across WMP contract periods, and for each class of WMP, shows that the market is creating a floor price, and is tending to agree with futures market expectations; prices will keep stepping higher as we move forward.”

“Strong bullish tones across the board and underlying demand within the wider markets remains steady.”

Stu Davison
NZX Dairy Derivatives

Demand significantly outstripped the reduced volumes of products on offer in both butter and WMP.

Buyers from China were back in the market as their covid restrictions eased and Southeast Asian buyers purchased impressive volumes across the board, followed by the Middle East.

“Overall, it would seem that dairy commodity prices have bounced, and the market is ready to push higher again; even with a lack of purchase volumes from our biggest market.”

Westpac senior agri economist Nathan Penny said easing covid restrictions in China and lower auction volumes on offer were the likely catalysts for the price gains.

“Over the next few auctions, we expect prices to continue to rebound on the assumption that China’s restrictions ease further and fact that global dairy supply remains very tight.”

Penny also delved into the auction details and said that weighted average WMP prices actually rose 5.7% compared with the previous auction in mid-May.

The results from the auction were consistent with Westpac’s current farm gate milk price forecasts; $9.30 for the 2022 season and $9.25 for the new season.

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