AgriHQ dairy analyst Susan Kilsby commented “Fonterra’s milk price forecast for the current season now looks achievable providing dairy commodity prices continue to rise through the remainder of the season at the rate currently indicated by the NZX Dairy Futures market. Ahead of the auction WMP was trading on the NZX market at US$3,700/t for the July 2015 contract. This suggests that prices still need to move up by another 10% for the $4.70 milk price to be attained.
“The strong increase in prices achieved at the February 17 GDT auction as well as the expectation that milk powder prices will continue to rise over the remainder of the season are the prime drivers of the improvement in the AgriHQ Seasonal Milk Price forecast for the 2014-15 season.”
Susan Kilsby commented “Dairy markets continue to gain ground rapidly as buyer demand increases at a time when the volume of product available on the GDT trading platform is very low. Buyers are looking to secure purchases now as they are aware milk powder could become more expensive in the coming months.”
The price movements at the GDT auction were anticipated by the market. Ahead of the auction the February 2015 WMP Futures contract was trading at US$3050/t, indicating the market expected WMP (regular grade, Contract 2) to gain 15%. The gain realised was slightly less than this, with Regular grade Contract 2 WMP gaining 13% to reach US$3,210/t.
Meanwhile the market expected prices for skim milk powder (SMP) and anhydrous milkfat (AMF) to increase by no more than 4%. SMP did a little better than this with Medium Heat Contract 2 SMP gaining 8.4% and Regular grade Contract 2 AMF gaining 6.4%.
The GDT Price Index gained 10.1% with the average selling price rising to US$3366/t. Demand was strong for the 22,957t of product sold with the auction lasting 14 rounds.
The AgriHQ Snapshot Farmgate Milk Price indicates that if the GDT prices from the February 17 auction were achieved across the entire season this would equate to a milk price of $6.15/kgMS, a 50c increase from the previous auction. The increase in the value of the NZ dollar effectively removed 23c from the previous AgriHQ Snapshot Farmgate Milk Price, but this was fully mitigated by the higher GDT prices.
