Milk Glut Drags Fonterra Forecast Down to $9.20/kgMS
A milk glut around the world shows no sign of easing, putting downward pressure on farmgate milk prices for the next few months.
Skim milk powder (SMP) rose by 6.7% and whole milk powder (WMP) by 3.6% -- the latter to an average price of US$3254/tonne, says BNZ’s Doug Steel.
“Firming international prices and a relatively low NZ dollar continue to add support to milk prices in New Zealand,” he said.
“While the dairy sector faces many challenges including environmental policy proposals, the price outlook is buoyant.”
Steel says market conditions suggest a 2019/20 milk price in the top half of Fonterra’s $6.55 to $7.55/kgMS range.
ANZ’s Susan Kilsby told Dairy News their season forecast of $7.15/kgMS could go higher, and the bank’s forecast for next season is $7.50/kgMS.
Last week’s GDT rise was stronger than anticipated especially with milk powders, she says.
SMP has been trading at a discount to WMP for years because of the build-up of stocks in Europe. While public stocks disappeared about a year ago it wasn’t clear how much was in the private sector. The quick rise in SMP price shows that those stocks have cleared.
Rabobank’s Emma Higgins says while cheese and lactose average prices moved lower at last week’s GDT and butter pricing moved sideways, all other categories jumped.
Strong preference remains for New Zealand SMP, with its price rising almost 7% to US$2924/t.
Buyers are looking for cover as we move past seasonal peak and SMP offer volumes on GDT drop off considerably from next month.
Demand has remained steady for New Zealand-origin WMP product across the course of the production season thus far and volumes on offer peaked at the last auction.
Rabobank is holding its $7.15/kgMS forecast for this season but will review next month.
Higgins says while travelling offshore recently she sensed that the market had anticipated the New Zealand spring to be more bullish than it was.
“We could possibly see some upwards pressure on markets still to come given that some buyers have been very relaxed about procuring product – particularly SMP.”
