The GDT index slipped 0.5% after five consecutive auction increases since early September.
Casein, cheddar, skim milk powder, butter milk powder and even whole milk powder prices rose, in descending order of magnitude.
Butter and anhydrous milk fat both suffered 5% price falls, exacerbating the trend toward dairy protein products, mainly SMP, over fat products.
ASB senior rural economist Nathan Penny said fat prices are near their seasonal lows and he expects them to lift in summer with the usual fall in milk production.
But they are still higher than a year ago.
Penny also highlighted the narrow margin between WMP and SMP prices, now only 10% versus 30% at the start of the year.
SMP prices have recorded seven consecutive rises since August and are now up 23%.
In contrast to milkfat products, SMP is now 55% higher than a year ago, and WMP is up 25%, both contributing strongly to the GDT index improvement of 33%.
No wonder Fonterra found cause a day after the GDT auction to raise its farmgate milk price forecast by 25c/kg MS, citing a 6% rise in GDT prices since it had last made a prediction.
Now past the peak of the season, which was slightly lower than the previous peak, Fonterra has forward sold a good proportion of its production and can therefore narrow the range of its prediction, to $7-$7.60.
Penny’s comment was that anecdotally both October and November delivered lower milk supply figures in New Zealand and that should translate into a resumption of upward-moving prices.
“European and United States production is also soft and, in short, production growth in the key dairy exporters is insufficient to meet growth in global demand.”
Both the Fonterra forecast and his own prediction of $7.50 are, therefore, subject to upside.
Westpac market strategist Imre Speizer said solid world demand for dairy commodities, especially from China, and contained supply suggest the near-term price outlook remains positive.
NZX dairy analyst Robert Gibson said his milk price predictor has dropped 4c to $7.48.
Butter prices are being affected by the demand for SMP, from which butter is extracted during processing, contributing to a comparative over-supply of butter on world markets.
One more GDT auction will happen before Christmas, overnight on December 17 and they will resume for the new year on January 7.
