Friday, March 29, 2024

Currency lifts AgriHQ milk price

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A slight easing of the New Zealand dollar hedge rate and a stronger outlook for whole milk powder futures have put 15 cents on the AgriHQ farmgate milk price forecast, lifting it to $6.60/kg milksolids.
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That was contrary to the latest Global Dairy Trade auction when the price index dropped 2.4%, the largest market fall since early March.

Whole milk powder was down 2.7% and butter and anhydrous milk fat dropped 3.6% and 3.4% respectively.

AgriHQ dairy analyst Amy Castleton said the news that Fonterra had hedged 71% of its foreign exchange for the current season, which AgriHQ had calculated at US72.2c, had pushed the previous AgriHQ forecast down. But easing spot exchange rates since then had helped the gain in the most recent milk price forecast.

The AgriHQ forecast also took into account the futures prices for the rest of the season.

“Notwithstanding the GDT results, WMP futures prices were $100/tonne higher than a fortnight ago, around US$3140 compared with $3020 in the auction for October delivery.

“On the other hand, the outlook for milk fat prices is weaker than it was a fortnight ago.”

Butter futures were down by US$50 to $180/tonne, depending on delivery months, and AMF futures were down $25-$100.

The 2.4% fall in GDT prices was a surprise to the market, which had expected higher prices on the basis of the lift in futures contracts and reports from NZ that spring milk production was going under water.

Westpac economists said the prior futures increases might have reflected Fonterra’s September Global Dairy Update suggesting poor weather was hampering milk collections, which, on a seasonally adjusted basis, were down.

“However, the auction result suggests that global dairy demand may not be a robust as thought.

“Our forecast farmgate milk price for this season remains at $6.50 compared with Fonterra's forecast of $6.75,” Westpac said.

ASB senior economist Chris Tennent-Brown said wet spring weather created the risk dairy prices would spike higher over coming months if production at this important time of the year was affected.

Despite the GDT price falls, butter and AMF values remained extremely high.

Global butter demand continued to surge and supply was struggling to keep up.

For that reason, the ASB remained upbeat on the outlook and would maintain its milk price forecast of $6.75.

ANZ rural economist Con Williams said the impact of the wet spring on NZ milk supplies remained uncertain.

While there had been a short-term slowdown in August and September, milk flow could recover this month.

There was downside risk to the Fonterra forecast of $6.75, he said.

The Fonterra-owned GDT platform said Polish Dairy, the fifth-largest European dairy company, would list skim milk powder online from November 21.

Since becoming a member of the EU in 2004, Poland’s dairy production had increased to the extent that exports were important and as were the price discovery aspects of GDT.

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