NZ dairy futures firm after Fonterra trims GDT offer
Fonterra has trimmed the amount of whole milk powder (WMP) it plans to put up for sale on the Global Dairy Trade platform, which is expected to be supportive for the price of New Zealand’s single biggest export.
WMP prices hit US$4364 a tonne in early March but have retreated since then, trading at a still healthy US$3997 tonne at the last auction in mid-June.
Futures market prices have weakened going into the new season, which started on June 1, but last week’s announcement was enough to give the dairy futures market a boost.
In a communication to the NZX dairy futures market, Fonterra said it had reduced the total offer quantity for whole milk powder on the GDT platform by 9,240 tonnes between August and January 2022.
“This change is the result of strong demand for WMP over the next six months outside of the GDT events platform,” Fonterra said.
Mike McIntyre, head of derivatives at Jarden, said Fonterra’s move would be supportive of prices.
“The volume itself was not significant but I guess the sentiment was,” McIntyre said.
“It suggests ongoing strong demand, which is consistent with the message that Fonterra has been giving all along,” he said.
“It is a reiteration of what they have said over the past three or four months.”
In late May, Fonterra announced an opening forecast for the 2021/22 season of $7.25 – $8.75 per kg of milksolids, with a midpoint of $8 per kg.
It also narrowed its 2020/21 forecast price range, with a $7.55 per kg mid point.
Chief executive Miles Hurrell said at the time the improving global economic environment and strong demand for dairy, relative to supply, had prompted the high 2021/22 forecast.
Jarden’s McIntyre said the move to take product off the table would be supportive of an $8.00/kg milk price forecast.
Current New Zealand milk production is at a trickle as farmers prepare for the peak producing months of August, September, October and November.
“A lot of water is yet to go under the bridge but we obviously had a good end to last season, which puts us in good stead for this season,” McIntyre said.
The next GDT auction is on Wednesday andfutures pricing for the July and AugustWMPcontracts is in the region of US$3900 a tonne.
The ANZ World Commodity Price Index continues to gain elevation, lifting 0.8 per cent, month on month, in June but dairy was the laggard, with very strong gains again recorded in the forestry sector.
In local currency terms the banks index gained 2.3 per cent, as stronger commodity prices were further boosted by the New Zealand dollar Trade Weighted Index easing by 1.1 per cent.
Dairy prices eased 1.5 per cent in June but remain 35 per cent higher than a year ago.
Most dairy products eased in price, with whole milk powder falling 2.1 per cent, month-on-month.
“It is not unusual for prices to soften at this time of the season as we start to sell high volumes of new-season product,” ANZ said.
“Milk production in the US-has lifted, which means we are likely to see more non-fat dry milk (a product similar to skim milk powder) and cheese being offered on world markets,” ANZ said.
“Overall demand for dairy products remains robust, but not strong enough for prices to be maintained at such lofty levels,” it said.
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