GDT up 4.5% overnight

The whole milk powder (WMP) index was up 3.2% with an average price US$3,423/MT and the skim milk powder (SMP) index up 9.8%, average price US$2,562/MT.

ASB rural economist Nathan Penny says another solid result in the bag, there is now clear upside to our $6/kgMS 2016/17 milk price forecast.

“As a result, we place our forecast “under review”. Moreover, we expect Fonterra to lift its milk price forecast from $5.25/kgMS to at least $5.75/kgMS sooner rather than later,” he says.

Key WMP prices rose a more modest 3.2% (although that is on top of the whopping 19.8% lift a fortnight ago), he says. For a change, the price strength came in products other than WMP. SMP made up some lost ground, jumping 9.8%. Meanwhile, BMP and cheddar posted the auction’s largest gains of 13.3% and 11%, respectively.

“The solid result reflects the continued impact of wet weather on NZ production,” Penny says.

“Fonterra has reported that milk volumes across the central and upper North Island over October were very weak, with this weakness continuing into November. In the Waikato region (which accounts for 23% of NZ’s dairy herd), late October milk volumes were down around 14% vs. the same time last season.

“At this juncture, we point out that prices have lifted earlier and higher than we anticipated. As a result, if NZ production over the course of the full season is indeed as weak as we now anticipate, then prices are likely to remain at current levels, if not lift further.”