Futures signal whole milk powder prices will snap two declines at this week's GDT

Tuesday 18th October 2016

The price for New Zealand's key dairy product, whole milk powder, is expected to rise at this week's GlobalDairyTrade auction after two consecutive declines, according to traders who are pricing in a lift on the NZX futures market.

Whole milk powder futures for October last traded at US$2,800 a tonne, a premium to their previous GDT level and implying prices will advance 2.5 percent at Tuesday night's auction, according to AgriHQ senior dairy analyst Susan Kilsby. The futures are pricing in a lift to US$3,000 a tonne by July 2017.

The average price for whole milk powder has declined by a total of 4.1 percent over the past two fortnightly GDT auctions following four consecutive gains which pushed up the price by 36 percent. The futures suggest traders expect the price to stabilise after New Zealand's dominant milk processor Fonterra Cooperative Group said it would reduce the amount of product at auction because its Waikato milk volumes for October were down 10 percent from the same time last year as a wet spring impacted pastures.

"We have seen a bit of a lift in the futures, suggesting we may see a small uplift in whole milk powder in this week's GDT," AgriHQ's Kilsby said. "The positive we are seeing out of it is the markets aren't expected to trend down any longer."

Kilsby said prices stabilised after Fonterra's announcement about weaker production flowed into the market.

While the southern hemisphere is experiencing lower milk production, there is still uncertainty over the longer term about the likely peak production levels from the northern hemisphere spring around March and April, she said.

BusinessDesk.co.nz

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