The recent lift in market prices followed six months of continual decline from mid-May to mid-November during which the GDT index lost 20%, of which 7% has now been recovered.
Skim milk powder prices have risen 12% and are now at their highest level for 18 months, a period of gradual success in selling the European Union stockpile built during the 2014-16 dairy downturn.
Butter and anhydrous milk fat prices rose 3.9% in the latest GDT auction and the demand was strong for short delivery contracts – 8% and 6.3% respectively for the February 19 shipments.
Whole milk powder had the weakest recovery – up 1.2% in the early January event and 4% since November – and the reason is the continuing strength of NZ milk production.
As the world’s largest producer and exporter of WMP, our season-to-date milk production increase of 5% has sent a clear signal to the market, particularly number one buyer China.
ASB chief economist Nick Tuffley said NZ milk supply would constrain prices in the short term following bumper weather conditions over the peak production months.
He expected production to remain firm for the rest of the season and that 5% figure to hold.
ASB maintained its milk price forecast at $6.
The 20% smaller offering of dairy products in the first January GDT auction compared with the two December events could also have contributed to better prices, Tuffley said.
Chinese buyers tend to compete strongly for near-delivery shipments early in the calendar year when dairy tariffs are at their lowest.
