Milk Monitor

Dairy market still going strong

By Gerald Piddock

Each month the milk monitor delves into the dairy industry and gives us the low-down on the good, the bad, the ugly and everything in between.

The New Zealand dairy market demand will firm over 2021 and 2022, as looks to be finishing the year on countries gradually get on top of covid a positive note following a good and the global economy rebounds. result in the mid-November This trend has already started in China Global Dairy Trade (GDT). and East Asia where dairy demand has

Prices lifted 1.8% at the auction with rebounded from its lows earlier in the average prices sitting at US$3157/tonne. year, with overall dairy prices regaining

RaboResearch senior dairy analyst some lost ground, he says. Emma Higgins called it an excellent result for NZ dairy farmers due to the large whole milk powder (WMP) volumes “However, we remain sold and buoyant global milk production. cautious about the

WMP prices remain largely dictated outlook and the scope by robust Chinese demand, which has for dairy commodity helped shift peak WMP GDT volumes for this sales season. The WMP volumes on offer at the GDT are now moving lower in prices to soften.” Susan Kilsby line with production trends.

Westpac were equally upbeat, with senior agricultural economist Nathan “Looking by product, the key change Penny saying the lift effectively erased we expect at this horizon is that demand the previous 2% fall in early November. and prices for milk fat will begin to

If that is the case, then the GDT normalise. Currently, milk fat prices are has been in positive territory since soft as consumers eat less cream and September 15. other milk fat products in settings such

Penny says in Westpac’s fortnightly as restaurants. Dairy Update that the result was in line “In particular, we expect that the with market expectations. rollout globally of covid vaccines will

With two auctions left in December, gradually allow more people to return to what do economists say about the restaurants and other venues that milk outlook for the rest of the year? fat consumption relies on,” he says.

Penny expects overall global dairy Penny also expects modest growth in supply from dairy exporters, which he cites as a reason why prices have held up well during the global covid recession.

“Moreover, we see a low probability that global supply will deviate materially from these trends by enough to offset the impact on prices from rising demand,” he says.

It was not without risk – a firming NZ dollar, the weather, the potential for dairy buyers running down stocks after having built them up during covid to protect against supply disruptions and uncertainty around global agricultural trade policy.

The word resilient features strongly in ANZ and ASB’s description of dairy prices.

ASB’s November Farmshed Economics says the sector has proved much more resilient than many had anticipated and has been another beneficiary of stillsturdy Chinese demand.

“Demand in China still looks to be holding up well, but there are reports that the country has now built up a good stockpile, raising questions around how far that trend can continue,” economist Nat Keall wrote.

ANZ ag economist Susan Kilsby recently told Farmers Weekly that global dairy commodity prices continue to defy expectations, consistently delivering good returns.

“However, we remain cautious about the outlook and the scope for dairy commodity prices to soften,” she says.

To that end, it raised its milk price forecast 20 cents to $6.70/kg MS. Westpac has kept its forecast at $7, the NZX milk price forecast has lifted 12 cents to $7.13/kg MS and ASB is at $6.75.

Rabobank has kept its forecast at $6.35/kg MS, although that is due to be updated this month and barring any unforeseen circumstances over coming weeks, that forecast will be moving upwards.

It all could mean an early Christmas present for farmers if Fonterra follows tradition and updates its forecast in early December. n