Global dairy prices surge

07 Feb, 2019 10:40 AM
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The Global Dairy Trade price index has recorded five consecutive rises. Source: Global Dairy Trade
It appeared dairy markets were factoring in the risk of drought in NZ disrupting production.
The Global Dairy Trade price index has recorded five consecutive rises. Source: Global Dairy Trade

Global dairy prices surged on Wednesday night with the Global Dairy Trade auction recording its biggest jump in more than two years.

The GDT price index lifted 6.7 per cent, the biggest increase since November 2016.

The lift was the fifth consecutive rise with the $US3265-a-tonne average price back to the same level as June last year before prices began a slow descent.

The rise surprised pundits, who had been forecasting a slight decline.

New Zealand-based ASB bank's senior rural economist Nathan Penny said it appeared dairy markets were factoring in the risk of drought in NZ disrupting production.

"This morning’s auction was one of those cases where we were happy to be wrong," he said.

"Indeed, in contrast to our expectations for a small fall, dairy prices spiked higher, with whole milk powder prices posting their largest price lift in over two years."

NZ had been in the midst of a heat wave in many parts of the country, including dairying regions, in recent weeks.

"Indeed, there is a material risk that this escalates into a drought and stymies production over the remainder of summer and into the autumn," Mr Penny said.

Most categories were up at the auction, led by WMP, which increased 8.4pc to $US3027/t.

Skim milk powder was up 3.9pc and cheddar was up 1.4pc.

Only butter milk powder defied the trend, down 3.1pc to $US3158/t.

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  • Overall prices have lifted 18.7pc since this season’s low in November.

    But Mr Penny warned the price gain could be temporary.

    "NZ production is on a strong footing, running at more than 5pc ahead of last season on a season to December basis," he said.

    "Also, it’s still relatively early days in this dry spell, with a drought declaration some time away.

    "With that in mind, we keep one eye on the weather and the other on milk production over coming weeks."

    Mr Penny said low participation in the auction indicated some buyers were hoping the price spike was short-lived and they were prepared to wait and see if the dry weather had an impact.

    ASB has lifted its forecast for the NZ farmgate price by NZ25 cents a kilogram milk solids to $NZ6.25.kg, on the back of solid gains in December and January.

    The Australian Commodity Milk Price Index is still forecasting a decline in prices.

    In its January summary, Deloitte Access Economics said it was forecasting a decline in prices for Australia’s exports overall for 2018-19.

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    Carlene Dowie

    Carlene Dowie

    is editor of Australian Dairyfarmer magazine

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