Thursday, March 28, 2024

Market waits on milk flow data

Avatar photo
Prices have risen again on the GlobalDairyTrade platform as the market anticipated another downwards move for milk production from New Zealand’s dominant processor, Fonterra.
Reading Time: 3 minutes

The co-op was expected to this week revise its seasonal production forecast to either minus 4% or minus 5%, compared with last season, because of persistent wet weather, gutless grass and lower milk yields in Waikato, the biggest dairy province.

The peak of spring milk production would be lower, delayed and elongated as milksolids production from Waikato’s 4000 herds and 1.4 million cows was down by 10%-plus this October compared with 2015.

The GDT price index rose 1.4% on October 19, led by whole milk powder up 2.9%, casein up 4.5%, cheddar up 3.7% and lactose up 5.6%.

The GDT index has risen 30% since the latest rally began in July and 43% since this year’s low point in March.

The AgriHQ milk price forecast rose 11c to $5.60/kg MS, responding to the lift in GDT prices and the firming tone of the NZX Dairy Derivatives market, dairy analyst Susan Kilsby said.

Her forecast anticipated whole milk powder prices would firm over the rest of the season but the price increases were not huge.

Peak milk intakes for processors would be well down on those in previous seasons, she said.

ANZ Bank rural economist Con Williams added 50c to his farmgate forecast for the season, now sitting at $5.25 to $5.50.

Westpac also upgraded its seasonal forecast by 30c to $5.30, saying that was in line with Fonterra’s forecast of $5.25.

Weather and pasture conditions would play a critical role in NZ’s milk production this season, Westpac economist Anne Boniface said.

“While the situation onfarm is likely to improve as the weather warms up, the reduced Fonterra offerings over the coming auctions should help underpin prices to a greater extent than we had previously anticipated.”

The demand side of the equation remained a little soggy and in the past fears of reduced production in NZ had induced sharper increases in world prices.

“While markets appreciate that a drought can stunt production, wet weather hurting production is a harder sell.”

Nathan Penny

ASB

Some market participants might expect a recovery in NZ milk output when the sun came out or the demand backdrop could be softer, Boniface said.

ASB Bank rural economist Nathan Penny reiterated his forecast that milk production would fall 5% this season, a factor that underpinned his optimistic farmgate forecast of $6/kg.

“While markets appreciate that a drought can stunt production, wet weather hurting production is a harder sell.

“Accordingly, we expect markets will wait for data to confirm weak production before bidding prices higher again.”

Penny predicted some choppy prices in coming auctions before they would rise again over the rest of the season.

Tatua chief executive Paul McGilvary said milk intake was down more than 10% and had been languishing for a month.

That would reduce the peak intake and it was possible the peak had already passed.

Tatua had budgeted for 15.2m kg this season but was now expecting to get less than 15m and the season might be down 3-4%. Last season it collected 15.6m and the season before 15.7m.

Westland Milk company secretary Mark Lockington said the co-operative was also experiencing weather-related conditions affecting supply.

Milk volumes were 2.46% behind the same period last year.

“In our case, our shareholders experienced a very wet autumn, which is unusual for the coast, and this, combined with our usual wet spring, has caused the small drop in production.

“Westland is predominantly a pasture-fed dairying region but while we have plenty of grass, the wet season means it contains less drymatter.

“Our experience of previous seasons, however, is that as the year progresses farmers are often able to make up for the weather-related drops in production.”

Total
0
Shares
People are also reading