The 1.4% lift in the GDT index for the March 2 sale was in spite of excess global dairy stocks and continued excess milk production so Kilsby expected further volatility at future sales.
But the auction did reflect a lift in the last two weeks of the NZX Dairy Futures market.
The world was awash with dairy products and it would take until at least the middle of this year for global milk production to decline and another year following that for dairy stocks to be depleted.
There were encouraging signs with recent demand from China improving and a large tender for dairy products from Algeria, both of which might have underpinned a rise in whole milk powder prices.
China imported 120,000 tonnes of WMP in January, 50% more than for the same month a year earlier, but with the world awash with milk, that demand was not a sign of recovery, she said.
“However, we see this more influenced by buyers wanting to take advantage of tariff gains available early in the year rather than a sharp lift in demand.”
She described NZ exports to China in January as “not significant”.
China’s increased imports were also driven by the high cost of domestic milk production and the lack of demand was prompting a decrease in the Chinese dairy herd.
“But overall, the laws of supply and demand indicate that a sustained price recovery for dairy commodities is still a long way off.”
“Global milk supply remains plentiful with supply from Europe continuing to grow particularly strongly.”
Westpac
Kilsby expected the GDT to provide “a bumpy road” for the rest of the year, evidenced by the AgriHQ 2015-16 farmgate milk price forecast lifting 9c to $4.14/kg MS, just 1c below Fonterra’s forecast.
The AgriHQ forecast for 2016-17 was $4.55/kg MS.
Westpac said the improvement was welcome but there were few signs of a marked turn-around.
“In particular, global milk supply remains plentiful with supply from Europe continuing to grow particularly strongly.”
The bank said it expected prices would fluctuate around current levels and it confirmed farmgate milk forecast prices of $4/kg MS this season and $4.60/kg MS for 2016-17.
In last Tuesday’s auction WMP rose 5.5% to US$1974 a tonne, SMP 1.3% to US$1802, lactose 7.9% to US$613 and rennet casein 14.9% to US$4569.
Anhydrous milk fat fell 8.3% to US$3254, butter 0.5% to US$2811, butter milk powder 2.9% to US$1452 and cheddar 0.7% to US$2528.
