Saturday, December 2, 2023

Milk price climbs high

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A farmgate milk price of $7.50/kg milksolids with upside potential nearer $8 has been forecast following the latest positive Global Dairy Trade auction results.
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The market index rose 1.7%, whole milk powder prices rose 2.2%, skim milk powder 3.3% at last week’s sale.

That prompted ASB dairy market analyst Nathan Penny to add 50c to his forecast, taking it to $7.50.

And the November fixed milk price offer from Fonterra settled at $7.38/kg MS, close to the top end of its forecast range than the $7.05 set for advance payments.

International dairy prices have arrived at a new, higher plateau now price volatility has fallen structurally.

Milk production growth in key major exporting countries, including New Zealand, is insufficient to meet growth in global demand.

“Overall, dairy auction prices have lifted 8% since early September at a time when the spring flush normally forces prices lower.”

Penny also set his opening 2021 season milk price forecast at $7.50 because Fonterra will be able to reap the full benefit of a lower New Zealand dollar exchange rate in next season’s payout.

Along those lines, NZX dairy analyst Robert Gibson said the spot milk price after the latest GDT numbers is $8.07/kg. The spot price indicates what the milk price would be if the November GDT results were achieved across the full season at current exchange rates.

The NZX forecast, six months through the season, is for $7.53, at the top end of the Fonterra forecast range $6.55-$7.55.

WMP prices have risen 12% since the start of the season, are 28% higher than November 2018 and are the highest they have been since December 2016.

Westpac strategy head Imre Speizer said China took 48% of the GDT offering of 38,000 tonnes and that demand from China has been almost the sole source of growth in markets this year,

October milk collections in NZ were 1.5% below October 2018 and it is now apparent milk production growth is non-existent here and elsewhere.

October is the largest milk production month, closely followed by November and December, which means there’s little chance of domestic supply rising significantly in the near term given lagged weather impacts.

“Global supply remains constrained, with the United States and European Union flat over the past year. 

“The implication from a supply perspective is that prices should remain firm,” Speizer said.

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