UPFRONT MARKET VIEW
INSIGHT
Steady as she goes for dairy Words by: Amy Castleton
D
PRODUCT MIX VALUE COMPARISON
airy markets are largely steady Product mix value comparison as she goes at the moment. May Product mix value comparison 1.30 has continued to be quiet for 1.30 dairy commodity prices. There 1.20 1.20 have now been four consecutive auctions 1.10 with very little change in the Global Dairy 1.10 1.00 Trade (GDT) price index. 1.00 Prices were down 0.7% at the May 4 0.90 0.90 auction and eased another 0.2% at the 0.80 May 18 auction. 0.80 0.70 Whole milk powder (WMP) prices Apr 19 Oct 19 Apr 20 Oct 20 Apr 21 0.70 remain well over US$4000/t. This is a price Apr 19 Oct 19 Apr 20SMP+AMF/WMP Oct 20 Apr 21 WMP/WMP SMP+Butter/WMP point where we would usually start to see WMP/WMP SMP+Butter/WMP SMP+AMF/WMP some downside pressure, especially with some of the milk production data we have seen out of New Zealand over the past couple of months. New Zealand milk production was for the 2021-22 season. However the NZX However demand remains strong, up a huge 8.7% year on year in March. forecast is currently sitting at $8.36/kg MS, particularly from China, and there doesn’t At the same time last year we were and it’s quite likely that the midpoint of appear to be much pressure on in a drought, but even so the leap is Fonterra’s range will start with a $7. prices any time soon. big. The NZX forecast has priced in some China has continued to buy Market expectations are that we downside in dairy commodity prices, as more product than last year will see another big lift for April indicated by the NZX Dairy Derivatives across most commodities on milk production (data is yet to be market. But, given we are only at the start offer on the GDT platform. published at the time of writing), of the 2021-22 season, there is plenty of This has particularly been with pasture growth conditions room for movement yet. the case for WMP and butter, having continued to be very good We are certainly not far enough through Amy Castleton. for this time of year. both products for which to confidently say that there will be an $8 Fonterra has added volumes We expect there are also still more milk price this season. to the GDT platform in recent cows around than usual as it has been months. difficult to get cows into the works. • Amy Castleton, senior dairy analyst at At the May 18 GDT event, WMP offer Furthermore the excellent milk price NZX Agri. volumes were up 28% compared to the forecast and likelihood of another high May 19, 2020 event and butter volumes milk price next season will have some were 59% higher. farmers milking a bit longer The extra volume has had some impact than usual. The NZX on butter prices, but very little impact on forecast for the full WMP prices. 2020-21 season was Following the May 18 GDT event, it +0.9% in mid-May, remains marginally more profitable for though it’s likely there NZ processors to produce butter than to is some upside in that produce anhydrous milkfat (AMF). forecast. However the price ratios of a mix of At the time of writing, SMP and butter, SMP and AMF or WMP Fonterra is yet to are virtually the same, meaning demand release its opening for certain products is likely to be driving farmgate milk processing decisions at present. price forecast 20
Dairy Exporter | www.nzfarmlife.co.nz | June 2021
