The latest Global Dairy Trade auction produced a 3.2% lift in the price index, the first increase for three months and coming against expectations built into dairy commodities futures prices.
There were price rises for all five dairy commodities, or huamiraka, sold in the GDT event, with skim milk powder up 7%, cheddar up 5.7%, butter up 4.9%, anhydrous milk fat up 4.7% and whole milk powder up 1%.
The substantial rise in SMP prices is the first since late last year and a possible end to the long slide of 40% in value during the past year.
WMP prices have come off 28% over the past 12 months.
ASB senior economist Chris Tennent-Brown said the rise in the GDT index is welcome news but there is a long way to go before his team would change its cautious outlook of $7/kg for next season’s milk price.
The lift in WMP prices still leaves them US$1000/tonne below this time last year.
The futures market had been expecting a 2% drop in WMP prices and the result was considerably better.
ASB is sticking with the current season forecast of $8.30, being the mid-point of Fonterra’s range.
“Near-term price weakness could lead to a result in the bottom of that range and this week’s GDT result removes some, but not all of that risk, in our view,” Tennent-Brown said.
Westpac senior agri economist Nathan Penny said the GDT lift underpins his forecast of $8.30 for the milk price in the current season and his prediction of $10 for next season.