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Home / The Country

Big increases to mark Global Dairy Trade's 300th trading event

The Country
18 Jan, 2022 05:42 PM3 mins to read

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The latest Global Dairy Trade auction has produced a fitting result to mark its 300th event - surpassing the seven year high recorded on December 3.

Following a relative flat start to the 2022 calendar year with a 0.3 per cent index increase on January 4, overnight prices jumped 4.6 per cent across the board.

Spearheading the charge was whole milk powder - which has the biggest influence on Fonterra's payout - with a 5.6 per cent increase, to once again break the $4K threshold, recording an average US$4082/MT.

All other products on offer recorded increases, including skim milk powder - Fonterra's second-biggest reference product – which rose 5.0 per cent to an average US$3963/MT and nearly broke the $4k threshold as well.

Butter followed suit by also recording a 5.0 per cent lift, to an average US$6158/MT, breaking the $6k threshold.

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Meanwhile, cheddar recorded a more modest 1.1 per cent rise to an average US$5546/MT, and anhydrous milk fat managed a slight increase as well - up 0.6 per cent to an average US$6720/MT.

Sweet whey powder and lactose were not traded, and butter milk powder was not offered at this event.

Once again, in excess of 30,000MT of product was traded, with 111 winning bidders emerging from 167 participants.

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On December 3, prices hit a seven year high shortly after the co-op lifted and narrowed its forecast to NZD $8.40 - $9.00 per kgMS, with a midpoint of $8.70 per kgMS, which would exceed the previous record payout of $8.40.

Fonterra chief executive Miles Hurrell hinted that a positive trend in GDT results could result in a payout lift as well.

"A five per cent movement makes you have a good look at those numbers," he told The Country's Rowena Duncum.

"So we'll be doing the numbers over the next few days to see - does this have an impact?"
The co-op would also take into account how higher prices affect global supply and demand, Hurrell said.

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"[With] these sorts of prices, you generally see a demand response also. So we need to understand – will we see buyers in certain parts of the world start to fall away at these price levels? Will we see a supply response out of places like the US?

"All of those things will play into our forecast as we go forward."

Overall, Fonterra had anticipated a rise in the GDT but the latest jump was still unexpected, Hurrell said.

"We did expect things to start moving upward but I guess the level of movement did take us a little bit by surprise."

Five per cent for whole milk powder was a "decent whack" but also reflected the international market reacting to dry conditions in New Zealand, Hurrell said.

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Fonterra recently announced it was not expecting as much production from its Kiwi farmers in the 2021/22 season.

Hurrell believed this had also affected the latest GDT result.

"We never quite saw the spring flush that we expected. We did expect pre-Christmas for milk flows to come back but as we all know, across New Zealand generally it's been pretty dry and we're seeing that playing out in our milk production numbers and our forecasts.
"We put that out to the market last week and I think finally buyers have woken up and realised it's a reality."

Also in today's interview: Hurrell talked about a strong season for dairy and what's in store for the long-term, how Fonterra's global teams were coping with Covid-19 and the Omicron variant.

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