Global Dairy Trade prices took an unexpected step backwards in the second February auction, leaving dairy analysts perplexed but unmoved on their farmgate milk prices.
The GDT price index for the five commodities sold in the auction fell 1.5%, following the 3.2% lift in the first February auction.
Butter was the standout performer, increasing by 3.8% to nearly US$5000/tonne, capping a 10% rise in butter prices since the recent low point in January.
Cheddar prices also rose by 1.5% and that commodity now has its best price level since last September.
But weighing down the index were price falls for anhydrous milk fat, down 2.6%, for skim milk powder, down 2.4%, and whole milk powder, down 2.2%.
Recovery from the Chinese covid lockdown centres on butter and cheddar as consumers return to restaurants, cafes and bakeries where butter and cheese are key inputs, Westpac senior agri economist Nathan Penny said.
“Over time, we expect the recovery to broaden into other products, notably WMP.
“However, in the short term and as stocks are run down, the price recovery may be stop-start in nature.”
Penny thought his $8.75/kg milksolids forecast was consistent with the February prices uplift in summary.
ASB senior economist Chris Tennent-Brown said GDT prices were weaker than expected and that may be related to the New Zealand milk production figure for January, up 1.9% year-on-year and minus 1.5% season-to-date.
ASB was sticking with its $8.65 milk price forecast for this season and $7 for next season.
Dairy analyst Alex Winning at NZX said the GDT auction result was not the direction the market was looking for and that hopes had been for some consolidation in prices at this auction.
“Data out of NZ is likely to have contributed to the sentiment, with the view that we’ll have plenty of milk for the next little while.”
