NZX whole milk powder futures contracts for April through November lifted, signalling prices will gain at the next GlobalDairyTrade auction on April 19, OMF said in a note.
The April contract rose US$65 to US$2995 a tonne, May increased US$75 to US$3000 a tonne, contracts from June to August rose US$50 to US$3000 a tonne, September and October contracts gained US$40 to US$2990 a tonne and November lifted US$50 to US$3000 a tonne.
Volumes were high at 1390 futures and 800 options.
States of emergency were declared in regions across the country after heavy rain caused several rivers to overflow, including the Rangitaiki River, which burst its banks yesterday morning, prompting the evacuation of Edgecumbe and forcing Fonterra to temporarily close its factory there.
The combination of rain and gale force winds also caused power outages, major landslides and closed roads and airports across the country.
For traders of dairy derivatives, the extreme weather conditions raised the prospect of lower dairy production that could bolster prices.
"Clearly the news about the floods is driving the WMP market," OMF financial markets director Nigel Brunel said in the note.
"There are around 50,000 cows or 20 million kilograms of milksolids in the affected areas.
“It will take weeks/months to clean up and impact grass growth.
“It’s not just there – several parts of New Zealand are very wet underfoot and likely to have an impact on ability to grow grass as we head into winter.
“Time will tell but fears are driving prices.
"The WMP differentials between futures and their GDT equivalents are building suggesting the next GDT could be well up."
OMF noted the April futures contract was trading US$70 above the equivalent contract at the last GDT.
Longer-dated contracts were also higher than the previous GDT price, with the May futures contract US$130 higher, June was US$125 higher and July was US$165 higher.
Fonterra has said it expected its milk production in the season ending on May 31 to fall 3% compared with last season. AgriHQ has forecast milk production to be 1.5% down. – Businessdesk
