The last Global Dairy Trade (GDT) of the year takes place next week and current indications suggest it may buck the trend of recent auctions.
New Zealand bank ASB says recent movements on NZX futures market suggests that Whole Milk Powder Prices could jump 10% at next week’s auction.
It says that Fonterra’s cut to its volume forecasts is likely helping the market at this stage.
Fonterra now sees NZ production falling by 6% this season compared to last.
Fonterra had stated previously that it expects its own milk collections to fall by 5%, but now expects “New Zealand volumes to be down by at least 6%”, according to its statement this week.
Bounce? WMP prices lookin good for 10% jump nxt wk Fonterra’s cut to vol f/c may be helping #dairyturningcorner ^NP pic.twitter.com/0BB2KV7Jcc
— ASB Markets (@ASBMarkets) December 11, 2015
This week Fonterra reaffirmed its 2015/16 milk price forecast at $4.60/kg.
It said looking out over the next nine months and basing our forecast on the view that current, unsustainably low prices will continue to impact production levels globally.
“We support the consensus view in the market that an improvement will take place, but the market remains volatile,” it said.
Prices at the last Global Dairy Trade auction increased for the first time since early October.
The event saw the GDT Price Index up 3.6%. At the last GDT overall dairy prices fell 7.9% for the third consecutive auction fall.
Overall and Whole Milk Powder (WMP) prices had fallen 17% and 22%, respectively, over the previous three auctions.