Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
The overnight lift was the third auction out of the last four to record a price lift.
However, by product the auction was more mixed relative to expectations, he says in his 'Quickview' outline.
"Key WMP prices rose bang in line with expectations, while the anticipated jump in SMP prices was absent (futures prices had hinted at a lift in excess of 5%). Instead, SMP prices actually fell 0.9%.
"Elsewhere, butter milk powder (up 16.2%) and anhydrous milk fat (up 4.9%) regained some of their recently lost ground. Butter prices posted a 3% increase, while casein (up 0.3%) also lifted marginally. Cheddar (down 0.8%) was the other main product we monitor to post a fall."
In terms of the price outlook, the auction result is somewhat moot given this was the smallest auction for the year, he says. ASB is sticking to its $3.90/kgMS forecast for 2015/16.
Attention now quickly turns to 2016/17. Fonterra provides its new season forecast next Thursday. And while we expect the milk price to ultimately end at $6/kgMS, Fonterra's starting point forecast for the season will be much lower.
