Thursday, April 25, 2024

Dairy prices break losing streak

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The Global Dairy Trade price index rose fractionally during the latest online auction, the first upward movement since early April. The rise of 0.3% broke a sequence of eight fortnightly auction decreases, during which the GDT index fell by 10% overall.
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The Global Dairy Trade price index rose fractionally during the latest online auction, the first upward movement since early April.

The rise of 0.3% broke a sequence of eight fortnightly auction decreases, during which the GDT index fell by 10% overall.

The small improvement in the latest auction was a result of butter increasing by 4%, cheddar by 2.8%, anhydrous milk fat (AMF) by 1.5% and skim milk powder (SMP) up 1.1%.

But whole milk powder (WMP) prices fell by 1.5%, including falls for all contract periods, and that product has fallen 18% since its recent peak in early March.

Westpac’s senior agri-economist Nathan Penny says the GDT results showed a divergence in dairy prices that stemmed from New Zealand’s strength in WMP, versus the European emphasis on SMP, butter and AMF.

NZ milk production was up 10% in autumn compared with 2020, whereas dry weather in Europe and lower milk production was reflected in improving prices for its products.

“For WMP, the strength or otherwise of NZ spring production will begin to provide fresh impetus for prices in either direction, with official spring production data first becoming available in mid to late October,” Penny said.

ASB economist Nat Keall thought the GDT results were positive overall.

After larger-than-expected falls recently, WMP’s descent had slowed and the contract curve had begun to flatten.

The futures market was predicting a floor in WMP just under US$3500/tonne.

“It was good to see SMP and the fat products come to the party and offset WMP,” Keall said.

Neither economist was moved to change his farm gate milk price forecast at this stage, because it is early in the new season and dairy commodities remain at historically high levels.

Westpac is on $7.75 and ASB is $7.90.

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