Latest lift in auction prices is an encouraging sign for the fortunes of dairy farmers

The good  news   was  running  in  favour  of  New Zealand’s  meat  producers early this week.  Today it is running in  favour  of our  dairy  farmers.

The  first  Fonterra  global  dairy  trade  auction in  three weeks  had  the  most  bidders  in  a  year and  charted  prices  on   a  rising  trend,  confirming  the  firm  tone  at the  previous  event   was  not  a  one-off.

The global dairy trade price index posted its biggest increase since early March, when it jumped 15%.

The key WMP product rose 3.3%, SMP was up 7.3% and both butter and cheese each rose almost 4%. Prices rose 4% overall in USD terms, although they were only up 1.2% in NZD terms, held back by a firming currency.

The average price for WMP was  US$3691 (NZ$5200) a tonne, with gains across all contract periods. The average price is sitting 24%  higher than at the same time last year.

Fonterra has been reducing the amount of WMP it offers on the auction platform, saying it has “extremely strong” contract demand and expectations for flat milk supply this season will limit its ability to increase production.

“Constant messages from NZ processors of tighter supply may have been heeded, along with tighter supply out of the European Union coming onto the radar of buyers also,” said NZX dairy analyst Stuart Davison.

“GDT offer volumes are much lower than this time last year.

“This auction will no doubt light a fire in the global dairy industry. Buyers that missed out at this auction will be scrambling to secure  product.”

North Asian buyers purchased less WMP than normal, although they remained the largest buying group. They were closely followed by buyers from South East Asia.

Buyers from the Middle East, Africa and the European Union all bought massive volumes of whole milk powder compared to their usual purchase volumes.

SMP rose  7.3% to an average US$3274/t, with lifts across all contract periods.

Butter prices rose 3.7%, cheddar 3.6%, anhydrous milk fat  3.1% lactose  6.4%, and buttermilk powder was up 3%.

Fonterra has forecast a record opening milk price for farmers this season, underpinned by an improving global economy, and strong demand for dairy relative to supply.

The co-operative has announced an opening forecast for the 2021/22 season of between $7.25KG/MS to $8.75 with a mid-point of $8.Its previous highest  opening price was $7KG/MS.

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