AgriHQ Farmgate Milk Price eases following weak GDT result

The AgriHQ 2015-16 Farmgate Milk Price has eased 7c to $4.60/kg milksolids (MS). This is in line with Fonterra’s current 2015-16 milk price forecast.

AgriHQ analyst Nick Handley commented, “The fall in the AgriHQ 2015-16 Farmgate Milk Price was primarily driven by the weaker GDT result and softer futures prices for WMP prior to the event.”

The NZX Dairy Futures market had anticipated a lift in both WMP and skim milk powder (SMP) prices from those achieved at the December 15 GDT event. Regular Grade WMP prices for contract 2 fell 3.1% on GDT, while Medium Heat SMP prices for contract 2 gained just 0.5%. The Futures market had anticipated increases of more than 6% for WMP and more than 11% for SMP.

The GDT Price Index lost 1.6% at the January 5 event, with the average sales price static at US$2458/t.

“The weak GDT results are disappointing given the significant gains anticipated by the market. However, global demand for dairy commodities continues to be weak relative to global milk supply” commented Handley.

Later dated WMP contracts traded at a small premium over the nearby contracts at the auction, though the curve is relatively flat. The futures curve is similarly flat, although starting from a higher point than the prices achieved at the latest auction. Buyers have been less concerned about securing supply for later in the season than previously.

GDT Price Indices were mixed.  The Lactose Price Index showed the largest gain, up 11.4%. The Butter Price Index gained 6.7%, and the index for Rennet Casein gained 3.9%. The price index for WMP, which accounts for the largest sales quantities, lost the most at 4.4%. SMP eased by a modest 0.8%. Cheddar prices were up 3.5%, and the Butter Milk Powder Index was up 1.0%. The Anhydrous Milkfat (AMF) Index lost 2.7%.

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