Dairy prices finish season with an uptick

CHINA’S purchasing of whole milk powder lifted the price index for that commodity 5% in the latest Global Dairy Trade auction.

It was the biggest positive move for WMP prices since last September and restored the average price paid above US$3200/ tonne, where it had been sitting since before Christmas.

The whole GDT market rose by 2.5%, following the plus 3.2% increase in the second fortnightly April auction.

That combined 5%-plus lift in the market has come late in the New Zealand dairy season – too late to move the expectation of the final farmgate milk price. Fonterra and most other processors said they will end the season around $8.30/kg milksolids.

Speculation has shifted to the opening forecasts for the next season, which begins on June 1. Fonterra won’t publish until around May 25 and is expected to use a wide range centred on something in the mid to low $8. Dairy analysts differ considerably at present – Westpac $10, ANZ $8.50, BNZ $7.60 and ASB $7. Fonterra’s well-informed forecast may cause the bank analysts to move closer to the centre.

In arguing for his very optimistic starting point, Westpac senior agri economist Nathan Penny said

Dutch firm

Neal Wallace NEWS Forestry

global milk supply is very subdued and Chinese demand is expected to return strongly later this year.

“This season has been a matter of starting high and ending low, whereas I expect next season to start low and end high.

“That said, we are still in the preseason period, and it is still very early days for a price prediction.”

ASB analyst Nat Keall said there is now upside risk to his low milk price forecast for 2023-24.

“Signals from this auction were mostly positive.

“China continues to purchase more WMP than it has done for more than 18 months.

“The WMP contract curve is not only elevated, but showing a robust upward slope in a signal that buyers are prepared to pay more to secure supply into the first half of next season.”

Keall thinks milk supplies from European countries and NZ are set for modest growth and the global economy is still set to slow and produce a headwind to dairy consumption.

“High levels of Chinese WMP production combined with subdued consumption mean we are unlikely to see aggressive bidding by Chinese processors any time soon,” Keall said.