Dairy prices continue with positive momentum, GlobalDairyTrade auction rises 3.6 pct

Last night’s GlobalDairyTrade auction witnessed continued positive momentum in dairy prices. The aggregate price index rose 3.6 percent, the fourth straight rise and takes prices to the highest level since early February, noted Westpac in a research report.

Recent trends were maintained by product. Whole milk powder prices rebounded the last of March’s slump, rising 5.2 percent to $3,223/Tonne. Robust demand for milkfat continued to push AMF and butter prices higher, whereas skim milk powder continues to be somewhat of an unwanted by-product, with prices dropping 0.9 percent to $1,982/tonne.

Demand from China has continued to be strong and is aiding in putting a floor under prices, dairy prices appear to be responding to worries regarding New Zealand supply off the back of recent poor weather. This season’s production is greatly dusted and is uncertain whether next season’s production would be considerably affected, stated Westpac.

Furthermore, European production has turned in recent months and is likely to trend higher over the rest of 2017 as farmers respond to increased farmgate prices. Increasing global supply is expected to be a drag on prices in the second half of this year, according to Westpac.

Farmgate milk prices is expected to come in at $6/kgMS for the 2016-17 season, consistent with Fonterra’s forecast. However, it might be slightly higher. For next season, a similar $6.10/kgMS is expected, contingent on some retracement in prices, said Westpac.

“Recent price gains mean a higher starting point for prices as we head into the new season, creating upside risk to our milk price forecast”, added Westpac.