The September 17 GDT auction contained healthy price increases for four of the six dairy commodities offered, 2.7% fall for lactose and 1.4% fall for butter.
Skim milk powder bounced an unforeseen 8.4% across all contract periods and the price average of US$2889/tonne ended near whole milk powder at $2985, up 3.2%.
Anhydrous milk fat rose 2% and cheddar was up 7.2%.
Commentators were surprised by the size of the SMP increase and the lack of a margin with WMP.
Rabobank dairy analyst Thomas Bailey says NZ SMP was now selling at a 23% premium over the same products from the European Union and the United States.
“Buyer preference for NZ product remains a key dynamic along with a shift in procurement strategies related to covid-19,” he said.
“For food security, ingredient buyers are willing to hold more stocks to avoid any complications in trade challenges.”
China doesn’t manufacture SMP because it lacks a market for the milkfat byproduct.
“Also, government food buying problems are at play and SMP is an easily stored source of protein,” he said.
ASB senior economist Chris Tennent-Brown says good spring weather and early season increases in NZ milk production appear to have eased any worries about product availability in the months ahead.
“With that in mind, the WMP increases are encouraging,” he said.
ASB was sticking with its $6.75/kg milk price prediction and didn’t expect any immediate change to Fonterra’s own forecast range of $5.90 to $6.90.
Westpac senior agri-economist Nathan Penny says the GDT prices justified his $6.50 milk price forecast and that the weakness in milkfat product prices was related to their exposure to restaurant and café demand.
“Covid outbreaks over August and early September put pressure on market confidence and in turn on prices,” he said.
“But as covid case numbers settle again, confidence has returned to dairy markets, and prices have stabilised once again.”
NZX says its own milk price predictor had gone up 11c to $6.78/kg after the latest GDT prices and the futures market reaction.
