Tuesday, 13 September 2016 10:37

GDT signals super start to spring

Written by  Pam Tipa
Rabobank dairy analyst Emma Higgins. Rabobank dairy analyst Emma Higgins.

“A super start to spring” is how Rabobank dairy analyst Emma Higgins describes the third consecutive significant rise on the Global Dairy Trade (GDT) event platform.

The GDT price index rose 7.7% with the average price US$2920/MT over 14 rounds. The all-important whole milk powder (WMP) index was up a more modest 3.7% with an average price of US$2793/MT.

“There were more bidders this time around: 199 bidders in this event compared to 177 in the prior event – a sign that the prospect of increased prices has flushed out more buyers looking to fill inventory pipelines before commodity prices move higher,” Higgins told Dairy News.

On the supply front, news of less milk available around the globe continues, Higgins says.

“The cut in European milk production has carried on into June and July and a drastic reduction in milk production in South America, along with a similar prospect in Australia, continues to support our view that the global exportable milk surplus will continue to tighten in 2016.”

This short-term coverage demand, combined with slowing global production, has translated into all dairy categories improving in the latest GDT event, Higgins says.

“This time around WMP lifted the least in this event at just +3.7% (US$2793/MT) compared to butter at almost +15% (US$3764/MT). SMP lifted a significant 10%, realigning Oceania prices with European SMP prices.”

ASB senior rural economist Nathan Penny says the dairy price correction in August and now September has been swift and large.

“For now, we expect prices to consolidate over coming auctions as markets will need to take a breath,” Penny says.

“For example, the relatively flat prices across the different WMP contracts hints that that may now be the case. However, we expect continued production weakness to lift prices again later in the season.”

Penny says NZ spring data, as it comes through, will support or challenge the view that global production will weaken further.

“Also, with EU’s production now also clearly on the wane, we expect the wedge between NZ-dominated products (WMP) and EU-dominated ones (SMP) to narrow. For example, June EU production data showed a 1.6% fall compared to June 2015.”

Senior economist Anne Boniface says in her agri update that, unlike recent auctions, the increase wasn’t driven by WMP. Instead SMP and anhydrous milk fat (AMF) prices rose 10% and 15.4% respectively while WMP lagged.

“That’s a bit weaker than the 8% or so lift the futures market had been pointing to,” she says.

The recently confirmed support from the European Commission to subsidise the region’s dairy farmers will have helped support SMP prices, Boniface says.

EU milk production is expected to be dampened further by the €500m payment to European farmers, including €150m for reducing milk production and extending private storage. If fully utilised, the payments for reducing milk production would lead to a 1.1 million tonne reduction in supply.

Boniface says fundamentals have moved in favour of dairy producers over the last month or so, with improved demand coinciding with lower milk supply from key global exporters.

More like this

Featured

Merlo goes greener

Obviously not wishing to get left behind by some of its competitors, Italian manufacturer Merlo is planning to add to its green-liveried telehandler range- with another set of green credentials in the shape of an all-new, all-electric battery-powered Merlo e-Worker model.

 

Growing a family legacy

What started with planting some acacia trees 25 years ago has become a multi-generational passion for the Hunt family in Te Awamutu.

Moves to improve winter grazing requirements

DairyNZ says it supports recommendations to the Government from an advisory group looking to improve winter grazing rules for farmers and achieve better environmental outcomes.

National

Expat workers ready for NZ

Dairy industry recruitment company Rural People Limited is seeing a huge increase in overseas interest to fill New Zealand farming…

Machinery & Products

Kubota ROPS tractors here

Kubota New Zealand product specialist Shaun Monteith says Rollover Protective Structure (ROPS) tractors make up 30% of all tractors in…

» The RNG Weather Report

» Latest Print Issues Online

Milking It

Dung paint

India now has its own cow dung paint, a world-first. 

Fresh for 60 days

A Queensland-based company is set to release its own production of milk this year that stays fresh for at least…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter