18 Feb 2015
NZ dairy prices up, up and away - ANZ
FXStreet (Bali) - The latest NZ dairy price auction, up 10.1%, shows further evidence that a more material correction is taking place, notes ANZ.
Key Quotes
"Dairy prices rallied further overnight with the GDT TWI up 10.1% to US$3,366/t. The detail of the auction that a more material correction is taking place was a lot more convincing than the previous auction. Whole milk powder (WMP) again led the charge increasing by 13.7% to sit at US$3,272/t, with an upward sloping curve into the middle of the year."
"This potentially sets a higher base for the milk price heading into the 2015/16 season, which would be good for the opening advance in May. All the other product categories also registered increases, which also bodes well. Anhydrous milkfat and butter continue to trade at a premium, indicating a shortage of New Zealand product is the main driver of the improvement in prices. However, cheese also bounced (+16.8%) off low levels and skim milk powder continued to increase (+5.7%). Skim milk powder looks to have been dragged higher due to the move seen in WMP, but slowing supply growth out of Europe will also be playing a part. All up with auction prices now tracking above Fonterra’s December forecasts this increases the possibility that there could be some slight upside to the 2014/15 milk price."
"Fonterra is expected to provide an update early next week. Any improvement would come as a welcome relief to farmer’s cash flow during the July-October period. But farmers won’t be going out popping the champagne as the major reason for the turn in prices is drought in certain regions and the low farm-gate price restricting the use of supplementary feed."
"The dynamics surrounding dairy prices could make for an interesting middle of the year for currency markets. A normalisation in weather conditions as winter approaches with dairy prices returning to their medium-term average (or above) along with rest of the New Zealand ticking along at a reasonable pace would be NZD supportive."
Key Quotes
"Dairy prices rallied further overnight with the GDT TWI up 10.1% to US$3,366/t. The detail of the auction that a more material correction is taking place was a lot more convincing than the previous auction. Whole milk powder (WMP) again led the charge increasing by 13.7% to sit at US$3,272/t, with an upward sloping curve into the middle of the year."
"This potentially sets a higher base for the milk price heading into the 2015/16 season, which would be good for the opening advance in May. All the other product categories also registered increases, which also bodes well. Anhydrous milkfat and butter continue to trade at a premium, indicating a shortage of New Zealand product is the main driver of the improvement in prices. However, cheese also bounced (+16.8%) off low levels and skim milk powder continued to increase (+5.7%). Skim milk powder looks to have been dragged higher due to the move seen in WMP, but slowing supply growth out of Europe will also be playing a part. All up with auction prices now tracking above Fonterra’s December forecasts this increases the possibility that there could be some slight upside to the 2014/15 milk price."
"Fonterra is expected to provide an update early next week. Any improvement would come as a welcome relief to farmer’s cash flow during the July-October period. But farmers won’t be going out popping the champagne as the major reason for the turn in prices is drought in certain regions and the low farm-gate price restricting the use of supplementary feed."
"The dynamics surrounding dairy prices could make for an interesting middle of the year for currency markets. A normalisation in weather conditions as winter approaches with dairy prices returning to their medium-term average (or above) along with rest of the New Zealand ticking along at a reasonable pace would be NZD supportive."