The latest Global Dairy Trade whole milk powder (WMP) futures prices from New Zealand bank ASB points to a rise in WMP prices at tomorrow’s Global Dairy Trade.
Commentators at the bank suggest that WMP prices could rise between 2% an 4% at the twelfth Global Dairy Trade auction of the year.
At the last Global Dairy Trade, WMP prices fell 1.7% while overall prices at the last auction on June 1 rose 3.4%. This was only the second time this year that dairy prices rose for the second time consecutively.
Skimmed milk powder (SMP) was the main mover at the last Global Dairy Trade auction, with an increase of 12.1% in SMP prices.
Another dairy (recovery) duck lines up? #NZXFutures point to WMP price lift of btw 2% & 4% Wed nite #greenshoots ^NP pic.twitter.com/48iJUnAY6y
— ASB Markets (@ASBMarkets) June 14, 2016
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Last month, ASB Bank’s Rural Economist Nathan Penny said that at this stage of dairy price recovery it’s very much a case of two steps forward one step back.
He says that a prime example of this has been the drop in dairy prices following two successive positive auctions, which has happened twice this year.
The price recovery is predicated on a global production growth weakening, but Penny says that at this juncture dairy buyers are not convinced this supply correction is happening.
The Rural Economist says that indeed, recent production data, particularly out of the EU, have been unconvincing on this front, however, ASB anticipates that this picture will change.
Through the middle of 2016, monthly EU production data will slow towards zero on an annual change basis – changes which ASB says it foreshadowed in a report a month ago.
Fonterra farmers resigned to another tight season following milk price announcement
Meanwhile, Fonterra recently set an opening forecast farmgate milk price of $4.25/kgMS for the 2016/2017 season, an increase of 35c on the forecast for the current season.
Chairman John Wilson said Fonterra’s forecast took into account a range of factors including the high NZD/USD exchange rate, supply volumes from other major dairying regions, current global inventory levels, and the economic outlook of major dairy importers.
However, the Dairy Chairman of farming group Federated Farmers, Andrew Hoggard, said that many farmers were hopeful of a price in the vicinity of $4.50.
“The reality is we have seen the opening forecast price change quickly as the market has changed.
“Unfortunately it has changed for the worse in the previous two seasons. Hopefully with this conservative forecast, we won’t see any further drops.”