Whole milk powder may rise in next week's GlobalDairyTrade auction, futures suggest

Friday 2nd September 2016

The price of whole milk powder may rise for the fourth straight auction on the GlobalDairyTrade platform next week, the NZX futures market suggests, in a further sign that global supply and demand are coming back into balance.

Premiums in the futures market suggest whole milk powder will rise between 5 percent and 7 percent at next week's auction, according to OMF, adding to a jump of almost 19 percent at the Aug. 16 sale that took the price to US$2,695 a tonne, the highest since October last year.

In each of the past two auctions, prices have exceeded those implied by the futures market amid signs that the worldwide supply glut is easing, bolstering optimism about the outlook. The GDT volumes for next week, released yesterday, show 19,500 tonnes of whole milk powder will be offered, down from 21,500 tonnes at the last event and up from 18,000 tonnes a year ago.

Traders say buyers who "sat on their hands" earlier in the year are back in the market, while the supply side remains limited.

Last week, Fonterra Cooperative Group raised its forecast farmgate milk payout for the current season by 50 cents to $4.75 per kilogram of milk solids, citing the recent price gains on the GlobalDairyTrade auction as global production is scaled back, while chairman John Wilson said prices were still at "unrealistically low levels".

New Zealand's terms of trade data for the second quarter, released this week, showed an 18 percent increase in the volume of milk powder, although an 8.7 percent decline in prices reduced the uplift in the total value of dairy exports to 1.6 percent.

BusinessDesk.co.nz

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