GDT lift raises hope for payout

BNZ is keeping its forecast at $6.10/kgMS – 10c above the current Fonterra forecast.

“But, really, it is getting to margin-of-error stuff with more focus now on next season,” Steel told Dairy News.

“The recent dairy price and currency movements have not changed our thinking on that season; our forecast is still $6/kgMS. Fonterra is due to make its first forecast for the next season before the end of May.”

The GDT price index rise of 3.1% was generally in line with expectations, Steel says. However, there were a few surprises in the detail. 

“Skim milk powder (+7.1%) and butter (+2.9%) prices both rose despite flat-to-negative expectations. It is difficult to see SMP pushing much higher, given that product is again flowing into intervention warehouses in Europe. Despite the rise, SMP prices remain low at US$2044/t.  

“Wholemilk powder (WMP) rose 3.5%, with an average price of US$2998/t, a solid gain, but we suspect a mild disappointment to a market probably looking for more.

“This would fit with the idea that the damage from recent NZ storms was not as bad as it could have been overall, although still significant in some areas.”    

Overall, Steel says this is the third consecutive gain in the GDT price index following the dip in late February/early March. GDT prices are down 5.5% year-to-date but up 52.8% on a year ago.  

“For the RBNZ, through the recent wiggles, dairy prices are likely little different from what the bank had factored into its projections in February. That suggests the NZ$, which has been tracking lower than the bank anticipated, is a genuine addition to inflationary pressure relative to the bank’s previous forecasts.”

Rabobank dairy analyst Emma Higgins says the GDT Event was good news all round – almost.

The average price was US$3139/t with the vast majority of products showing a lift in pricing.

“The fat complex continues to perform strongly.

“Despite a softening in anhydrous milk fat (AMF) prices by a modest 0.5%, the average price still stands at a strong US$5930/t and butter was up almost 3% to US$4892/t. Pleasingly, cheddar lifted 6% to US$3462/t, breaking its downward trend since the beginning of the year.

“Powders also showed signs of life. Skim milk powder (SMP) jumped a healthy 7.1% and is now back above the US$2000 mark again (at US$2044/t).  NZ product is back to achieving a price premium over European product.”  

Shortness in fresh product following the abysmal weather in parts of the north will be helping this, says Higgins.

“Furthermore, we had some positive WMP activity overnight with prices just shy of the $3000 mark (+ 3.5% to US$2998/t). With the northern hemisphere heading toward its seasonal peak (May) we can expect to see the gap in SMP prices (in NZ and elsewhere) compared to other commodity products continue, and also expect to see the potential for product to start delving into intervention.  

“Since the last GDT note the Lithuanians and Germans have entered small volumes of SMP into intervention.  

“Despite this, market prices generally seem to be steering clear of breaking below the intervention price threshold for now, but we shall see if that holds true in the coming weeks.”