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Dairy prices post ‘impressive’ gain at overnight auction, analyst says

Dairy products posted an impressive gain at the global dairy trade auction overnight.

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Dairy products posted an impressive gain at the global dairy trade auction overnight.

Dairy prices posted an “impressive” gain at the global auction overnight as buyers pushed prices higher to secure product.

The global dairy trade price index increased 4.3 per cent to an eight-month high at the fortnightly auction. The average price for whole milk powder, which has the most impact on what farmers are paid, lifted 2.7 per cent to US$3921 (NZ$5408) a tonne, prompting speculation prices are likely to push through US$4000/t.

Fonterra last week increased its forecast milk payment for farmers to record levels for this season as demand for dairy holds up while supply tightens. At the latest auction, demand was solid from the dominant North Asian buyers, but analysts said the real driver came from the other regions.

“Each region, with the exception of North America, had their elbows out at this auction, buying more than previous events, and willing to push prices higher to secure product,” said NZX dairy analyst Stuart Davison. “This is another good signal of the level of demand in the market, and the willingness of buyers to secure product.”

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Davison said the price gains were “impressive” and further increases may be ahead.

“Last auction saw prices break out of recent ranges, but the current result shows prices searching for a far higher price range,” he said.

STUFF

Fonterra factors in fat and protein levels in milk when buying it off farmers.

That bodes well for New Zealand’s biggest export commodity and the money that is likely to flow through the economy.

Fonterra has forecast a farmgate milk price range for the 2021/22 season of between $7.90 and $8.90 per kilogram of milk solids.The $8.40 per kgMS midpoint, which farmers are paid off, would see almost $13 billion flow into regional New Zealand.

Prices gained for all products offered at the latest auction, except for butter milk powder, which slipped 3.8 per cent.

Skim milk powder jumped 6.6 per cent to a five-year high of US$3627/t, narrowing the price gap between it and whole milk powder.

“There was some trepidation that this price movement may not happen, as buyers start to get price sensitive at these levels,” Davison said. “That thought pattern has been shattered. Buyers are willing to chase down skim milk powder at all costs, well aware of tighter global availability.

“Proteins remain in hot demand, and this is the perfect example,” he said.

Cheddar prices surged 14 per cent to a five-year high of US$5058/t, butter rose 4.7 per cent to US$5350/t, anhydrous milk fat gained 4.2 per cent to US$6384/t and lactose edged up 1.6 per cent to US$1272/t.

“Skim milk powder and cheddar are leading the charge and will most likely slightly regulate at the next auction, but this does show the market’s expectations for dairy for the short term, with flat prices across contract periods,” Davison said.



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