Friday, April 12, 2024

Dairy prices lift again in latest GDT auction

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Supply beginning to tighten on a number of commodities.
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The GDT price index lifted 4.4% in the latest auction, the third lift in a row since September 5.

WMP prices increased for the third consecutive event, up 4.8% to an average price of US$2931/t while the SMP price index increased 6.6% at GDT 341 with an average price of US$2558/t.

AMF prices increased 3.7% to an average price achieved of US$4979/t and butter prices lifted too, up 1.3% to an average price of US$4806/t.

Cheddar prices eased significantly, down 4.8% to an average price of US$3853/t.

The auction’s average price was US$3104/t.

NZX dairy analyst Alex Winning said supply is beginning to tighten on a number of commodities with United States, European Union, New Zealand and South American milk production all beginning to feel the effects of increased costs and extreme weather patterns.

North Asia was the top buyer for WMP, butter and SMP, and southeast Asia was the top buyer for the rest of the categories.

“Last auction saw an uptake in North Asian buying, and with the region’s inventories getting closer to expiration on top of lower Chinese milk production, and a January tariff lift on NZ dairy, it’s no surprise to see movement from that part of the world,” Winning said.

Cheddar continued to prove its volatility however. With the direction of EU cheese prices, particularly out of Ireland, it is no shock that NZ cheddar prices are taking a hit, she said.

“Overall, however, NZ farmers will be happy with this result, with large volumes of the milk price affecting commodities all increasing overnight.”

Westpac senior agri economist Nathan Penny said while the recent positive results are welcome, global dairy prices remain low.

“WMP prices have yet to fully make up the lost ground over August when prices fell 18% – prices remain around 5% below the level as at the end of July. Looking over a longer period, WMP prices sit at 16% below their five-year average. 

“With that in mind, it’s difficult to judge yet whether prices have fully turned a corner,” he said in the bank’s Agri Update.

“To make that call we will need to see further price lifts over the remainder of the year. Indeed, the recent price rises may have much to do with the fact that low prices have brought buyers back to the market rather than any fundamental change or improvement in global dairy demand.”

Penny said the strength or otherwise of New Zealand spring production has the potential to provide fresh direction to prices over coming months.

Likewise, ASB economist Nathaniel Keall, writing in the bank’s Commodities Weekly publication, remains cautious about the outlook for the season.

“After a bit of a blip last auction, there is still comparatively little sign of a return in purchases by China – something we’ve regarded as a precursor to any sustained recovery in prices, given its influence over global dairy demand. 

“China is still only buying around 15-50% of the WMP on offer from auction to auction, far short of the proportions it was picking up when prices reached cyclical highs in 2021 and the beginning of 2022.”

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