INSIGHT
UPFRONT MARKET VIEW
Dairy market steadies in April Words by: Amy Castleton
A
pril was a relatively quiet month in terms of dairy commodity prices, with little change at either of the month’s Global Dairy Trade (GDT) events. Prices rose just 0.3% at the April 6 auction, and eased 0.1% at the April 20 auction – thus leaving prices pretty much where they were a month earlier, on balance. We’re at a time of the year where Southern Hemisphere production starts to wind down, while the Northern Hemisphere is entering its peak. It typically is a pretty quiet time of year for the dairy market. New Zealand milk supply seems to be The world is yours: While demand from Chinese buyers for dairy commodities lessened at the April 6 GDT tracking along okay, though soil moisture auction, other regions stepped in to take China’sin place. % change the GDT price index levels aren’t brilliant in a lot of areas. The 15.0% East Coast is especially dry for this time of PERCENTAGE CHANGE IN THE GDT PRICE INDEX year, and particularly in the South Island, 10.0% while Taranaki is wetter than usual for this time of year. Conditions were largely 5.0% reasonable through summer, however, which should keep autumn production going. The NZX forecast for full season 0.0% milk production is +0.1% at the time of writing, virtually unchanged from last -5.0% season. In Europe, French and German -10.0% production has been falling over recent 2 6 5 2 7 4 2 Jul 6 3 1 5 3 7 4 3 7 5 2 7 Jul 4 1 6 3 1 5 2 2 6 Jan Feb Mar Apr May Jun 2019 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2020 Aug Sep Oct Nov Dec Jan Feb Mar Apr months; however this is now reportedly 2019 20192019201920192019 202020202020202020202020 2021202120212021 2019 201920192019201920192020 202020202020202020202021 evening out, with milk supplies through Europe’s peak expected to be at least in take China’s place, illustrating that there end of March), compared to a $7.84/kg MS line with last year. Steady milk supplies out is good demand for dairy commodities forecast for the 2020-21 season (calculated of Europe should help keep commodity outside of China as well. in early April). At the time of writing, the prices steady over the next few months, Traders on the NZX Dairy Derivatives Derivatives market had the September until attention turns back to how Southern market seem to expect that commodity 2021 milk price futures contract at $7.64/ Hemisphere production is tracking prices will fall over the remainder of kg MS, and the September 2022 contract in our spring. 2021, though much of the downward at $7.50/kg MS. It’s likely Fonterra will be Demand has been very trend in forward curves for dairy more conservative when it announces its China-led in recent months. commodity futures seems to be opening forecast in May, but an opening High domestic prices and built around NZ’s spring. It would forecast of around $7/kg MS for the 2021increased dairy consumption be expected that a lift in our milk 22 season looks fairly likely. At this point have increased demand for supplies – albeit seasonal – will the market feels balanced. Despite the imported dairy. On top of put some pressure on commodity current high prices it seems that it will take that is the need to ensure food some sort of economic shock for anything Amy Castleston. prices. security, meaning more stock In saying this, the outlook for next to move too significantly. building. However Chinese buyers did season’s milk price remains quite positive. step back a little at the April 6 GDT event. The most recent NZX forecast for the 2021• Amy Castleton, senior dairy analyst at Buyers from other regions stepped in to 22 season is $7.38/kg MS (calculated at the NZX Agri. 20
Dairy Exporter | www.nzfarmlife.co.nz | May 2021
