He says butter and cheddar are key inputs in the restaurant and bakery businesses.
Penny says over time he expects the recovery to broaden into other products, notably whole milk powder (WMP), which is used as the benchmark to set farm gate milk price.
“However, in the short term and as stocks are run down, the price recovery may be stop-start in nature,” Penny says.
He made the comments after last night’s Global Dairy Trade (GDT) auction saw the price index drop 1.5% and WMP prices dip 2%.
However, the biggest mover was butter prices, jumping 3.8%; cheddar was up 1.5%.
Penny points out that butter prices surged by 10.6% over the two February auctions, while cheddar prices are up 5% since the end of 2022.
For February as a whole, prices posted modest gains, with overall prices rising 1.6% and WMP prices lifting 2.1%.
Penny says the latest GDT result was a little below expectations.
“We had pencilled in a 1% WMP price lift ahead of the auction, while the futures market was pointing to a similarly small rise.”
Westpac is sticking to its 2022/23 milk price forecast of $8.75/kgMS.
