Friday, March 29, 2024

Dairy prices finish 2016 down slightly

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Dairy commodity prices have stumbled at the final hurdle of the year with prices easing 0.5% at the Global Dairy Trade (GDT) event overnight.
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Results were mixed with whole milk powder (WMP), anhydrous milkfat (AMF) and lactose losing ground, while butter, butter milk powder, cheddar and rennet casein prices lifted. The GDT Price Index for skim milk powder (SMP) was unchanged from the previous event.

Fonterra increased the volume of WMP on offer at the December 20 GDT event in order to meet buyer demand. However at the auction last night there was not quite enough demand to soak up the additional product offered. WMP sold at an average price of US$3,568/t.

Fonterra offered buyers 12,120t of WMP at the December 20 event, 6% more than was offered at the previous event. 

The lift in WMP volumes was due to Fonterra changing its product mix in favour of WMP which has been generating higher returns than other dairy products. Last week there was some speculation that the lift in WMP volume was due to more milk being collected but that myth was quickly dispatched when the NZ milk production data for November was released yesterday.

Milk intakes for November were down 5.3% on a milk solids basis, but this information didn't seem to fuel any extra buying activity on GDT.

Prices for WMP futures contracts trading on the NZX Dairy Derivatives market have eased over the past week but at the close of business yesterday the market was still factoring in a slight lift in GDT prices.

This slightly negative GDT result will have minimal impact on the farmgate milk price. The result is certainly still strong enough to support the $6/kgMS price currently forecast by Fonterra. The AgriHQ milk price for the 2016-17 season will be updated tomorrow once the market has had a chance to factor in this GDT result.

Early morning trading on the NZX Dairy Derivatives market has been mixed with the price of some futures contracts lifting while others have fallen. The 2016-17 milk price contract is still priced at $6.32/kg milksolids(MS) while the contract for next season is currently priced at $6.35/kgMS.

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