The price index for whole milk powder (WMP) lifted 0.6% with price gains recorded for short-term delivery but weaker prices recorded in the later delivery contracts.
The price for regular grade WMP for November delivery fell less than 0.2%. Extra product was added into that contract last week so it was good to see that the market was able to absorb the additional WMP without too much of a negative impact on the price, AgriHQ dairy analyst Susan Kilsby said.
The result was a little stronger than signaled by the NZX Dairy Derivatives market. The September 2017 WMP futures contract closed yesterday at US$3080/t indicating the market expected a US$50/t correction, however, the price of the particular grade of product futures settled against fell only US$5/t.
Overall there was 18,250t of WMP available at last night's auction with the quantity of WMP trading at its highest level in the past 11 months.
"It was surprising to see more product added to the auction given the weak start to New Zealand's milk production season," Kilsby said.
Data released yesterday by the Dairy Companies Association revealed August milk intakes were down 1.5% when measured by milksolids.
Skim milk powder prices also softened overnight with the SMP Price Index falling 1.2%. SMP prices remained weak and were unlikely to change while there was so much stock held in Europe.
"There has been a flurry of SMP entering the European Union intervention programme recently with this season's buying window to close at the end of September.
At the end of July there was 357,359t of SMP in the programme, most of which was put into storage in 2016.
"Only small volumes of SMP have been put in storage this year but it has continued to act as a safety net for dairy processors. At the end of this month when the programme closes its doors to new product we may see a further correction in the SMP price," Kilsby said.
Milk fat products continued to be the star performers.
Anhydrous milk fat recorded the largest price lift with its index gaining 5.3%. The butter index lifted by 1.2%. AMF had been underpriced relative to butter when measured on a milk fat content basis. Last night's price movements went some way to addressing the difference, however, AMF remained cheap relative to butter.
Cheese prices weakened overnight. The cheddar index fell 1.9%. The nearby contact was well supported but prices eased back for product to be delivered between November and January.
Overall, 34,117t of product was traded. That was 1.8% more volume than at the previous event.
The auction stretched out to 17 rounds over two hours and 20 minutes.
