Saturday, March 30, 2024

Surprise lift in GDT prices

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Prices at today’s Global Dairy Trade auction defied expectations with an overall 1.7% lift driven by a 2.9% rise in whole milk powder.
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Market analysts had predicted a 6% fall in the WMP price with Fonterra offering 9.7% more product than it did at the March 7 auction.

But WMP lifted across the board. Regular grade WMP for all delivery periods was priced at US$2830/t or US$2835/t with the higher grade product selling at an additional premium. Overall WMP sold at an average price of US$2855/t.

AgriHQ dairy analyst Susan Kilsby said it was a particularly good result for WMP considering there was 9.7% more WMP available.

"For the market to absorb the extra volume available and to pay a higher price for it is an outstanding result and a complete turnaround from a fortnight ago."

The NZX Dairy Derivatives market had already reacted to the results with WMP futures trading up sharply this morning. The April contract lifted US$280 in early morning trading to US$2880/t. Big gains were also recorded in the other contracts.

"Market fundamentals do support the higher WMP prices but so often the dairy markets are driven by sentiment,” Kilsby said.

“There has been a lot of negative sentiment in the market recently so this result marks a real turnaround in attitude."

The number of bidders participating in the auction increased by 20 to 154 but the number of successful bidders at 113 was unchanged from the previous event.

Milkfat products continued to be the star of the show. Demand for butter and anhydrous milk fat (AMF) was showing ongoing strength, reflected in last night's results. The price index for AMF lifted 3% while the butter price index gained 4.9%. 

The positive results from WMP and the milk fat products were offset by a small fall in cheese prices and a large fall in skim milk powder (SMP).

The cheddar price index moved back 1%, achieving an average price of US$3406/t. Cheddar production had lifted across most supply regions and stocks had lifted in the United States which, along with the European Union, was a very large cheese producing region.

That was making it more difficult to achieve premium prices for cheddar but it was generally still outperforming many other product streams.

SMP remained a challenge to sell because of the large global stocks. SMP prices dropped below US$2000/t for most grades. All of the SMP offered last night by Arla Foods and Amul either didn't sell or didn't move off its starting price. Fonterra product fared a little better with its product generally selling but at low prices. The average price achieved was US$1948/t.

There were huge stocks of SMP in Europe and stocks were starting to grow elsewhere. Processors were taking advantage of the high fat prices so had lifted butter production which also meant more SMP was being produced.

Milk price futures had not yet traded this morning but the positive result from last night's auction might result in some higher prices being offered, Kilsby said.

The AgriHQ farmgate milk price would be updated tomorrow so the futures market had time to factor in the overnight GDT results.

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