‘Tightening global dairy supply to be a key market driver of prices’
Following yesterday’s unchanged Global Dairy Trade auction, ASB Bank in New Zealand has said that tightening global dairy supply will be the key dairy market driver.
Accordingly, ASB has said that tighter dairy supply should contribute to higher global prices.
The latest Global Dairy Trade auction has held steady on the previous auction, with no change in overall dairy prices.
Whole milk powder (WMP) posted the strongest increase in prices at the Global Dairy Trade, with a 1.9% increase in prices. Rennet Casein (RenCas) posted the next highest increase (0.4%) followed by anhydrous milk fat (AMF) (0.2%).
Skimmed milk powder (SMP) prices were down 1.1% while butter was also down 5.0%.
From here, ASB Bank has said that with the market focus shifting away from Brexit, dairy fundamentals should begin to drive price movements once again.
ASB is continuing to look to data that supports its view that global supply is tightening. For example, Fonterra’s New Zealand collections were down 10% in June versus June 2015, although it has said that it is still early days in the Kiwi production season.
It says this is due to a strong increase in the first four months of the year (+5.5%), to be followed by a slowdown, which is likely to lead in the second half of the year to a milk collection below last year.
Data in the first quarter compares with a period of time last year when several Member States reduced milk collection to limit surplus levies because the quota system was still in place until April 1.
By contrast, the Commission says some downward supply adjustments are currently taking place. In addition, as every year, it says weather will play a major role.