Global dairy prices move further up by 4.1% since mid January at GDT
Dairy prices continued their march higher at the latest Global Dairy Trade auction, the GDT price index jumping 4.1 per cent from the last auction in mid-January.
The price of whole milk powder – which has the biggest influence over Fonterra’s farmgate milk price – gained 5.8 per cent to US$4324 a tonne, revisiting levels not seen since March last year.
There were price increases across the board.The price of skim milk powder – another key driver of the milk price – rose by 2.1 per cent to US$4051 a tonne.
Cheddar prices rose by 2.4 per cent to US$5684 a tonne.
The average price paid at the auction was US$4630 a tonne.NZX dairy analyst Stuart Davison said North Asian buyers were again dominant, highlighting that there is no sign of demand from that part of the world easing in the short term.
“North Asian buyers are more than willing to chase prices higher, to secure the product they need, a very common outcome on the GDT platform,” he said.
“The Asian market as a whole, both South East Asia and North Asia, remains the dairy market powerhouse currently, and this auction confirms that both regions have demands that still need filling, even at current prices,” Davison said in a commentary.
Today’s auction maintains upward pressure on Fonterra’s farmgate milk price forecast.
Late last month, Fonterra lifted its 2021/22 forecast milk price range to $8.90 – $9.50 per kg, up from $8.40 – $9.00 per kg of milksolids.
This increases the midpoint of the range, which farmers are paid off, by 50 cents to $9.20 a kg.
The new forecast would contribute $13.8 billion to the New Zealand economy this season if it comes to pass.
Westpac senior agri economist Nathan Penny has lifted his milk price forecast to $9.50/kg – the very top of Fonterra’s range.
“Bad weather and surging costs have hit New Zealand dairy production from all sides,” he said in a commentary.
“Accordingly, we now expect 2021/22 production to fall 3 per cent compared to the 2020/21 season.
“At the same time and as a result of lower production, we have bumped our 2021/22 milk price forecast up by 50 cents to $9.50/kg,” he said.
Penny said he expects the milk price “ducks” to continue to line up for dairy farmers over the remainder of the season.
“That’s not to say there aren’t risks.
“And on that front, we continue to highlight the cost pressures that farmers are facing,” Penny said.
“Keeping a lid on costs wherever possible will remain key to making the most of this purple milk price patch.”