HIGH: Westpac’s Nathan Penny says GDT prices were now nearly 40% higher than their five-year average and the index at 1455 is very close to the high plateau reached in the second half of 2013.
DAIRY commodity prices again rose across the board in the first Global Dairy Trade (GDT) auction for February, led by whole milk powder up 5.8%.
Prices for all products rose and the GDT index rose by 4.1%, to follow the 4.6% increase in the previous, mid-January auction.
Prices are now close to their historical highs set during the 2013-14 commodities boom, butter having set a new record, up 3.3% to US$6359/tonne.
Cheddar is also in new territory, after putting on another 2.4% to reach US$5684.
Dairy analysts responded to the new price levels, and recent news that New Zealand’s production will fall 3% this season, by jacking up their milk price forecasts.
Westpac’s Nathan Penny put on 50c to predict $9.50/kg milksolids and Susan Kilsby, for ANZ Research, also added 50c to sit at $9.30.
Penny said GDT prices were now nearly 40% higher than their five-year average and the index at 1455 is very close to the high plateau reached in the second half of 2013.
The GDT index has risen 25% since last August, prompting dairy companies to forecast $9-plus farm gate returns this season.
Dairy production in all major exporting countries is soft and steeply rising prices for fuel and fertilisers are holding down farmers’ ability to respond to high milk prices.
“All up, we expect the milk price ducks to continue to line up for dairy farmers over the remainder of the season,” Penny said.
Kilsby said the milk price outlook had benefited from the fall in the value of the NZ dollar to US65c, but that a gradual rise to 70c by the end of 2022 was built into the farm gate forecast.
“Dairy prices lifted much faster than anticipated in January as the impact of tight global supplies for milk started to have a material impact,” Kilsby said.
“Buyers are now well aware that there will not be a lot of additional products available from NZ during the latter part of the milk production season.
“Our milk supply is tracking 3.2% behind for the season to December and production in December was down 5.5% month-on-month.
“Dry conditions throughout January mean milk supplies are likely to be curtailed for much of the remainder of the season.”
GDT reached its 300th trading event in mid-January, marked with some publicity about US$30billion worth of products traded during its 14 years.
Director of the Fonterra-owned business Eric Hansen said that was equivalent to over nine million tonnes of products, with an average clearance rate of 97%.
Six companies quote products on the GDT Events platform: Fonterra; Dairy America; Amul of India; Arla in Denmark; Arla Food Ingredients; and Polish Dairy.
“GDT brings together buyers and sellers from around the globe, with core commodity dairy products from four continents offered to registered bidders from over 70 countries,” Hansen said.
“We look forward to further serving the dairy industry in the years ahead, by increasing liquidity on GDT Events and actively supporting the growth of efficient dairy derivative trading associated with it.”
