All regions across the globe participated in the auction with North Asian buyers secured well over half of the total volume sold, NZX dairy insights manager Stu Davison says.
Extremely tight global supply has helped push dairy prices up 4.6% at the 300th GDT auction.
The lift is the largest price index gain for six months. Prices averaged US$4463 with WMP prices the highest moving, jumping 5.6% to $4082 a tonne. SMP and butter both lifted 5% to $3963 and $6158 respectively. AMF and cheddar cheese had small rises of 0.6% and 1.1% rise to reach $6720 and $5546 respectively.
BMP was not offered for auction while lactose and sweet whey powder prices were not available.
All regions across the globe participated in the auction with North Asian buyers secured well over half of the total volume sold, NZX dairy insights manager Stu Davison said.
He called the result a,“secure at any cost” situation.
“It seems the market has also taken full stock of the tightness of milk supply globally and are now increasingly willing to pay the price to secure product.”
Evidence of this was the SMP market, which he labelled “a shambles”.
“What used to be normal price differentials have been smashed to bits, as buyers secure the product they need in any shape possible.”
Westpac senior agri-economist Nathan Penny said the lift was expected, given the futures market had predicted prices would rise. It predicted a 5% lift in WMP prices, which was very close to the 5.5% lift in the auction.
Demand outstripping extremely tight supply was the major reason for the result, he said.
“Where supply goes, prices will go. Supply is driving things and will be the dominant factor for at least the next year, if not the next couple.”
In New Zealand, the cold wet spring had given way to an extremely hot, dry summer which had weakened production.
This was indicative in Fonterra’s announcement of a reduced production forecast earlier this month, which undoubtedly influenced buying, he said.
“Given that supply is already weaker than we already knew, the markets are scrambling to get hold of products and hence prices are going higher again.
“It is essentially a supply story, given that New Zealand’s production is weak and similarly weak in most other exporting countries.”
Prices will continue to be underpinned by this supply weakness in the short term. The result also supported the bank’s $9/kg MS milk price forecast for this season, Penny said.
Over the medium to longer term, supply should rebound which is why the bank and forecasted a $7.50/kg MS for the new season, he said.
