Tuesday, 09 June 2020 09:44

Global dairy prices settling down

Written by  Sudesh Kissun
Demand for dairy in China is increasing. Demand for dairy in China is increasing.

Global dairy prices are settling down after a rollercoaster ride triggered by the COVID-19 pandemic.

Last week’s Global Dairy Trade (GDT) auction saw the price index rise 0.1%, a slightly better outcome than expected by markets. This followed a 1% rise in the previous auction. Whole milk powder price rose 2.1% with increased demand from China.

At last week’s auction, whole milk powder fetched US$2,761/MT – still 5% below the year’s peak in January and 9% below the average of the past three years ($3,040).

While analysts believe these are early days, the positive GDT result signals that the worst may be over for some key markets. 

However, Northern Hemisphere production and a high NZ dollar could affect the milk payout for NZ farmers.

Westpac’s senior market strategist Imre Speizer says it’s hard to infer too much from just one auction.

He says the result is consistent with the rebound in economic activity seen in many countries since the contraction in April. 

“Activity levels remain extremely weak, but possibly past the worst,” he says.

Westpac is forecasting a 2020-21 farmgate milk price of $6.30/kgMS.

Speizer notes that the futures market is broadly in agreement, pricing it at $6.20/kgMS currently, slightly more upbeat than the $6.13 two weeks ago and $5.93/kgMS at the end of April. 

Last month Fonterra announced an opening forecast range of $5.40-$6.90/kgMS.

ASB is more optimistic and has an opening forecast of $6.50/kgMS. Senior economist Chris Tennent-Brown notes that this is towards the top end of Fonterra’s range. 

While any lift in whole milk powder prices is encouraging, over recent weeks the stronger NZ dollar is an offsetting negative, he says.

It was noteworthy that North Asian share (a proxy for China demand) rebounded at last week’s auction to a level slightly above average for the past 12 months. 

RaboResearch dairy analyst Tom Bailey notes that conditions in China generally continue to improve economically, which typically leads to increased demand for dairy. 

However, Rabobank estimates that significant domestic stockpiles of milk powder remain in China due to spray drying in February, resulting from supply chain constraints in processing fresh dairy products at the time. 

Bailey says these stocks will likely pose a demand risk for imported powders later in the year. 

 He also noted that demand for whole milk powder was up as markets reopen and supply chains are refilled. 

However, while distributors might be refilling their pipelines, true consumer-level demand remains opaque around the globe. 

More like this

Dairy demand on the rise

There is increasing evidence that dairy demand is on the upswing, according to Rabobank senior agricultural analyst Emma Higgins.

Dairy prices slip

Dairy prices pulled back a bit in the overnight Global Dairy Trade (GDT) auction and it’s mostly to do with New Zealand’s biggest market, China.

Covid's urban/rural divide

According to a new study from the University of Otago, there was a visible rural/urban divide in Covid-19 vaccination rates.

Covid inquiry to visit Northland

Better understanding the impact of the Covid-19 pandemic on the people of Northland, and the role communities played in the pandemic response, will be the focus of a visit from the Covid-19 Inquiry, says inquiry chair Professor Tony Blakely.

Optimism in the air

There is a feeling of optimism in the dairy industry, says Federated Farmers dairy section chair Richard McIntyre.

Featured

Govt urged to reduce ETS units

The Climate Change Commission wants the new Government to reduce NZ Emissions Trading Scheme (ETS) auction volumes as son as possible.

Dairy sheep, goat woes mount

Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.

Alliance's Pure South cuts win gold

Meat co-operative Alliance Group has bagged four gold medals at the Outstanding NZ Food Producer Awards, achieving top honours for every cut entered.

Dairy demand on the rise

There is increasing evidence that dairy demand is on the upswing, according to Rabobank senior agricultural analyst Emma Higgins.

Fert use tumbles as prices spike

Fertiliser use in New Zealand over the 18 months is about 25% down from what it consistently was for the previous decade or more, says Ravensdown chief operating officer Mike Whitty.

National

Waikato dryer sold

An independent milk spray dryer in Hamilton, destined for liquidation, has been bought by a South Auckland goat milk processor.

Machinery & Products

Samasz sets its sights high

Since its arrival in New Zealand, Polish mower manufacturer Samasz, currently celebrating 40 years in business, has carved a niche…

Trojan keeps on going

The DR200 Trojan farm two-wheeler motorcycle was introduced over 28 years ago, when the engineering team at Suzuki New Zealand…

Still going strong!

The saying goes ‘if it ain’t broke -don’t fix it’, so it’s no surprise to see an old favourite in…

» Latest Print Issues Online

Milking It

'A complete dog

OPINION: It's not just a rural banking inquiry that farmers want. Freshwater farm plans are another major headache for farmers.

Action, not words

OPINION: The new Government may be farmer friendly, but it's not love, rather action that farmers want.

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter