Ahead of GDT 154 there were aggressive reductions made in the offer volumes for TE155, 156 and 157. Despite these changes the GDT curve again significantly undershot the expectation set in place by the NZX futures. Pricing of second quarter deliveries remains flat, reflective of the aggressive powder pricing observed in the physical markets. The improved demand signals emanating from China were cited as a catalyst for a better outlook for the New Zealand farmer, but recent Chinese economic data and share market activity will dampen that enthusiasm.
The overnight event was not a bad outcome for Fonterra NZ SMP, with a couple of the front contracts showing improved results. However, once again there was an alarming tone in both the Fonterra Australia and Arla results. The European contracts either did not trade or did not trade at a price away from the opening price point. Fonterra Australia saw product change hands at a significant discount to both the European Intervention price and product from NZ (C1 Australian product traded at a 15% discount to similar product from NZ, all other contracts traded at a discount greater than 10%)
The performance of butter (especially C2 which published $500 higher than any other price on the curve) saw it provide a better return for fat than both AMF and WMP. A theme throughout the evening was the flat nature of the curve which suggested buyers are not willing to pay up for the certainty of locking in future-dated prices.
Mike McIntyre is Head of Derivatives, First NZ Capital
