The world now loves a cheese!
The first Global Dairy Trade (GDT) auction for the new season delivered underwhelming results last week.
Whole milk powder prices slumped 3% to US$3,173/metric tonne while milk fats managed modest gains.
ASB economist Nat Keall notes that dairy prices have largely drifted over recent auctions, struggling to maintain clear direction.
Keall says the WMP contract curve at the last auction appeared to show momentum, with buyers paying a premium for product stretching into the middle of the season.
But that has largely dissipated, with prices flatlining in a US$3,150-$3,200/MT range this auction.
Keall says the most notable feature of last week’s auction was China’s continued absence from the market. The North Asia group took only around 34% of the WMP on offer this auction, equivalent to the sort of proportion it was buying during its zero-Covid period last year.
“Looking over the last handful of auctions – and six months on from the ending of those restrictions – China’s return to the global dairy market has been modest and uneven.
“This isn’t hugely surprising. Local WMP production remains strong, while domestic consumption remains comparatively subdued. Recent Chinese economic data has printed below expectations too, undermining the notion that a strong domestic recovery will put a rocket under dairy auction prices anytime soon.”
ASB has retained its $7.25/kgMS farmgate milk price forecast for the season.
Keall says the prevailing global dairy market dynamics don’t look hugely supportive for prices.
“As we’ve said for some time, global dairy supply looks to be past the lows of recent years at the same moment that global growth is slowing, crimping consumption.”
If there’s a silver lining for farmers, it’s that the NZ dollar continues to underperform.
“Indeed, this was the catalyst for our decision to add 25c to our milk price forecast last week.
“The Kiwi continues to trade in a lower band in the aftermath of the RBNZ’s surprise dovish turn a fortnight ago….
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