The overall GDT price index was unchanged as the stronger WMP prices were offset by softer prices for most other commodities.
And global milk supply might slow down a little quicker than expected because the European Commission yesterday agreed to provide more than €1 billion in additional aid for its farmers.
The Commission announced a €150 million aid package specifically to provide an incentive to reduce milk production.
It also planned to prolong its intervention and private storage aid programmes for SMP.
“The additional aid granted by the European Union will help to slow growth in milk production – a trend that has already started to occur, while the intervention programme will help soak up any extra SMP that is produced.
“This will be beneficial to the market in the short-term as it will allow global supply and demand to rebalance more quickly but continuing to support inefficient farms means we are likely to be faced with oversupply situations again in the future,” Kilsby said.
After the auction the AgriHQ 2016-17 milk price fell 6c to $4.48/kg MS as dairy commodity futures prices have generally eased in the past fortnight.
WMP futures prices have generally fallen by US$20 to $50 a contract since the previous GDT auction, however, prices did firm for some of the later dated contracts yesterday.
”Given the firmer prices recorded on GDT for WMP we are likely to see a positive reaction in the NZX Dairy Derivatives market today,” Kilsby said.
There had been ongoing activity in the Milk Price Futures contracts trading on the NZX Dairy Derivatives market.
There had been several big trades as dairy farmers locked in a milk price for this season. The September 17 contract – for the current dairy season – last traded at $4.52/kg MS.
There were now 490 open positions held in that contract that equated to 2,940,000kg MS – the equivalent of the annual production of 20 average sized farms.
The AgriHQ Snapshot milk price, pricing the whole season at the latest GDT price, clawed back 1c to $3.71/kg MS.
That change was primarily driven by the New Zealand dollar, which had fallen about 1.5c in the past fortnight.
But some of the gains were offset by the weaker prices for skim milk powder (SMP) and butter.
The WMP price index gained 1.9% at the auction. Higher prices were recorded for all contract periods with the exception of the nearby contract which corrected from a sharp rise at the previous event.
The index for anhydrous milk fat lifted 0.2% and the rennet casein index was up 0.4%.
All other commodity prices were down.
The butter index recorded the largest fall dropping 5% to an average price of US$2687/t, cheddar was down 1.1% with prices for the September contract lifting while prices for other contract periods were down.
The SMP Price Index dropped 1.1%. SMP accounted for the second largest volume offered behind WMP. Prices achieved for product supplied by Fonterra and that supplied by Arla were similar. The butter milk powder index dropped 0.5% and lactose was down 4%.
