Saturday, March 30, 2024

PHEW! GDT prices bounce 14.8%

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FARMERS should not expect plain sailing after the GlobalDairyTrade index shot up 14.8% at last night’s auction, AgriHQ dairy analyst Susan Kilsby has warned.
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The auction result lifted the AgriHQ Farmgate Milk Price predictor to $3.85/kg MS, the same as Fonterra has forecast.

The price lifted because Fonterra cut its GDT offering by 33.5% for the auction but global markets were still oversupplied, Kilsby said.

“The dairy markets have turned around following five months of falling prices. Strong gains were recorded for virtually all of the products offered by Fonterra.

“Fonterra’s milk price forecast is now looking achievable but dairy commodity prices need to continue to track upwards in line with NZX Dairy Derivatives market projections to reach the current forecast price.”

The NZX Dairy Derivatives market indicates whole milk powder prices will increase by a further 45% by the end of the season. That price projection is built into the AgriHQ 2015-16 Farmgate Milk Price of $3.85/kg MS.

“The hefty reduction in the volume available on GDT was the trigger required to turn market sentiment,” Kilsby said.

“The NZX Dairy Futures market recorded a surge in trading activity in the past week.

“Futures prices indicated we would see a price increase in the vicinity of 15% in the specific grade of WMP that the Futures contract settles against.

“The bounce in GDT price exceeded market expectations, which appeared ambitious ahead of the auction. However, it might not be plain sailing from here on,” Kilsby said.

“Global dairy markets remain over supplied. Until global milk supply slows the market will remain very volatile.”

Fonterra still had a lot of product to move but it would be easier to sell that product now prices had started tracking upward.

The WMP Price Index gained 19.1%. Fonterra offered 18,000 tonnes of WMP at the auction, 36% less than at the previous auction.

The AgriHQ Snapshot Farmgate Milk Price increased by 90c to $3.39/kgMS. The jump in GDT prices was the main driver of the lift although the lower NZ dollar also provided support. The Snapshot price is an indicator of what the milk price would be if the GDT prices from latest auction were achieved across the entire season.

GDT Price Indexes were up for virtually all products traded.

Skim milk powder gained 8.5%. Anhydrous milk fat increased by a whopping 26.6% but the Butter price index gain was more modest at 10.8%. Cheddar gained 4.4%. Lactose and butter milk powder were the only commodities to fall in price, dropping 7.8% and 13.8% respectively. 

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