Tuesday 19th December 2017
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The last GlobalDairyTrade auction of the year is expected to produce a mixed result, as the threat of drought in New Zealand pushes up prices for whole milk powder while abundant supplies of skim milk powder in Europe depress prices for that product.
"Whole milk powder (WMP) has found support in recent weeks from the dry conditions NZ is currently experiencing," said AgriHQ senior dairy analyst Susan Kilsby. "The extremely hot and dry summer thus far will reduce milk supplies this season and therefore WMP supplies are expected to tighten. Elsewhere in the world, milk supplies are on the rise and this is putting downward pressure on the price of most other dairy commodities."
December whole milk powder futures contracts on the NZX are trading ahead of the last GDT auction price, signalling traders expect the price to rise 2.8 percent at tonight's auction, AgriHQ said. In contrast, the latest price of the December SMP futures contract indicates a 2.8 percent fall at auction.
Futures prices also indicate mixed results are likely from milkfat products. Butter prices are expected to lift by as much as 5 percent while anhydrous milkfat (AMF) prices are expected to weaken by about 1.5 percent, AgriHQ said.
"This is the opposite to the recent trend in pricing seen in this market where AMF has gained more support than butter," Kilsby said. "Butter prices have eased from the excessively high levels reached earlier in the year and the differential between the various markets has been reduced."
Fonterra Cooperative Group, New Zealand's dominant dairy processor, will offer 16,335 tonne of WMP at tonight's auction, just 20 tonne more than the last overnight auction on Dec. 5.
Meanwhile, the offer volumes for both SMP and AMF are considerably higher than originally forecast for tonight's auction, however the volumes are only slightly greater than the volume traded at the last event, AgriHQ said.
New Zealand is the world’s biggest dairy exporter, selling about $13.1 billion of milk powder, butter and cheese overseas in the year through September. NZX launched the dairy derivatives market in October 2010 with the aim of becoming the global hub for trading tied to the country's biggest export commodity.
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