INSIGHT
UPFRONT MARKET VIEW
Left: Oceania SMP prices provided the boost to overall SMP prices.
Dairy holding its ground
airy commodities had a good month in June with prices rising at both Global Dairy Trade (GDT) events. The GDT price index ended the month at the highest level it’s been since early April. There has been some good demand from South East Asia in particular and from China to a lesser degree. Chinese demand has been growing but it faltered below the previous year’s levels at the June 16 event. There have been reports that China has built some stockpiles of milk powder, which may explain why Chinese buying volumes have fallen below year-ago levels. Sentiment seems to be leaning more positive at present, no doubt buoyed by the lifts at GDT. This can be seen by lifting prices for dairy commodity futures on the NZX Dairy Derivatives market, which are mostly up on month-earlier levels. The increase in prices – both on GDT and futures prices on the derivatives market – has resulted in a jump in the NZX milk price forecast for 2020-21, which in midJune was $6.62/kg MS. This forecast does seem high and it’s likely to ease as the season progresses because pressure does remain on commodity prices. While commodity prices have had a boost this month, the market is still 22
Dairy commodity prices 7000
US$/tonne
D
milk powder (WMP) prices were up 2.2% and skim milk powder (SMP) prices were up 3.1%. However, Chinese buying of WMP was well below year-ago levels. Oceania SMP prices provided the boost to overall SMP prices but European SMP prices did actually fall at GDT. There is plenty of SMP and non-fat dry milk coming out of the Northern Hemisphere, and these factors indicate possible headwinds that are yet to hit here in Oceania. In the fat side of the market, butter prices slid 1% at the last GDT while anhydrous milkfat prices have been a bit volatile and it remains uncertain just how more resilient. demand may play out over the Butter is more sensitive to the next several months. demand from food service, which Part of the demand is yet to fully pick back up. story recently has been Whilst lockdown the easing of lockdown restrictions are easing around measures around the the world many food service world and things starting outlets can’t yet operate at to open back up to some full capacity and the demand degree. at the consumer level is not This has meant businesses necessarily there either. need to refill their supply So it’s unlikely that we will see Amy Castleton. pipelines, but this spike in much of a lift in demand for butter demand for certain products won’t last any time soon and thus prices are unlikely forever and the question is what demand to see much movement either. will look like once things settle again. We’re still in a state where anything Oceania milk powders have done well could happen but at this point things this month. At the June 16 GDT whole look reasonably positive.
6000 5000 4000 3000 2000 1000 Apr 18 WMP
Oct 18 SMP
Apr 19 AMF
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Butter
Dairy Exporter | www.nzfarmlife.co.nz | July 2020
