Prices for a key ingredient of chocolate and icecream rose in a surprise move at the latest Global Dairy Trade auction. Photo / 123rf
Prices for a key ingredient of chocolate and icecream rose in a surprise move at the latest Global Dairy Trade auction. Photo / 123rf
Fonterra’s milk price forecast for the 2024/25 season, due out next week, is shaping up to be comfortably over $8 per kg of milksolids (kgMS) after this morning’s stronger-than-expected Global Dairy Trade (GDT) auction.
All the Fonterra reference products, which help the co-op formulate its href="https://www.nzherald.co.nz/topic/farming/" target="_blank">farmgate milk price, put in a strong showing at the auction – the last of the season, with anhydrous milk fat hitting another record high.
China – a key customer – seemed to have returned to the market after appearing to stand back at recent auctions.
Whole milk powder prices, key to Fonterra’s farmgate milk price forecast, gained 2.9 per cent to US$3,408/tonne ($5,591) the second-highest price in the past 12 months.
Skim milk powder, ranked second, firmed 3.5 per cent to US$2,629/tonne.
She said the NZX’s forecast for next season’s milk price is $8.42/kgMS.
The NZX’s “snapshot” – which estimates what the milk price would be if it was based entirely on this morning’s auction – was $9.25/kgMS.
“While the results surpassed those of the SGX-NZX Derivatives market ahead of the auction, particularly for milk fats, market sentiment in other regions had pointed to potential supply restrictions in the third and fourth quarters,” Crickett said.
Buying was led by a return to the market by North Asia, with the region nearly doubling buying activity at the previous auction early this month – which was the lowest on the platform since 2011.
Crickett said a 0.3 per cent drop in March milk production by China could be the reason behind this resurgence in buying activity from the region.
New Zealand milk production for April 2024 was down 4.1 per cent.
Crickett said the decline, together with flat production in the Northern Hemisphere, may have also played a part in today’s price action.
Most banks have cast their forecasts around the mid $8 mark.
Rabobank has forecast an $8.40/kgMS price for the 2024/25 season, but has warned the global dairy price recovery was likely to be slower.
Rabobank senior dairy analyst Emma Higgins.
In its latest quarterly dairy report, Rabobank said milk production from major global export regions will expand only modestly in the third quarter before gaining some momentum towards the end of the year.
“Low profitability over the past 12 months has led to a decrease in dairy herds in key regions like the US and South America while weather-related issues have also affected milk output in recent weeks, with diminished rains in New Zealand and excess rains in Europe,” said Emma Higgins, report co-author and Rabobank senior agricultural analyst.
“And this subdued global milk supply growth should help underpin a continuation of the dairy market recovery and an improvement in milk prices for dairy producers in most regions around the world.”
Higgins said global demand recovery signals were mixed and consumers’ purchasing power was under pressure.
ANZ said this morning’s results were “much stronger than the market had expected”.
The bank had forecast $8.50/kgMS for next season.
Open Country Dairy, Fonterra’s main local competitor, has issued an $8.10 to $8.40/kgMS forecast for next season.
Fonterra’s most recent forecast for the current season, which ends on May 31, is in a range of $7.50 to $8.10kgMS.
DairyNZ’s break-even milk price for the 2024/25 is forecast to sit at about $7.76kgMS.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
