Wednesday, December 6, 2023

Tentative welcome for dairy market lift

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Too soon to celebrate after the season dairy has had, analysts caution.
Westpac senior agri economist Nathan Penny says the GDT is encouraging for the broad increases across four out of five dairy commodities sold.
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New Zealand whole milk powder prices on the Global Dairy Trade selling platform have risen 10% in September but dairy market analysts say they are not prepared to call this a market trend.

The GDT price index rose 4.6% on September 20, after a 2.7% lift earlier in the month.

However, in the previous four auctions, over July and August, the GDT index fell more than 12%.

Westpac senior agri economist Nathan Penny said the latest GDT is encouraging for the broad increases across four out of five dairy commodities sold.

Skim milk powder and anhydrous milk fat led the way with 5.4% and 5.3% respectively and butter also rose 3.8%.

The key whole milk powder prices rose 4.6% after 5.2% on September 6.

Cheddar prices were the only category to fall, minus 1.7%, and are now 25% lower than they were at the start of 2023.

Fonterra will not be banking the non-reference product price premiums it has over the past season. 

Penny cautioned against too much optimism, saying that dairy prices remain low after falling 25% over the past 12 months.

His farmgate milk price forecast is unchanged at $6.75/kg milksolids.

ASB senior economist Chris Tennent-Brown said it is encouraging to see another sign that dairy prices might be finding a floor, but he remains cautious on the outlook.

“It was pleasing to see a return of Chinese demand at this event, and we will be watching this development at upcoming auctions.”

“We retain our $6.60 milk price forecast for the 2024 season but are pleased to see some upside risk develop in this auction.

“We look forward to October’s auctions to see if the improved demand from China is


Penny said it is difficult to judge yet whether prices have turned a corner.

“To make that call we will need to see further price lifts over October and into November.

“Indeed, the recent price rises may have more 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.”

NZX dairy analyst Alex Winning said the physical market lift is welcome but falls short of expectations on the derivatives market.

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