Relief for dairy farmers as prices rebound at latest GDT auction, with buyers chasing product across the board

Fonterra’s  farmers  will  be  relieved that prices in the Global Dairy Trade auction this week have rebounded – up 3.2%  across the board.

It is the first rise since December 6  The index had fallen 2.8% on January 3 and 0.1% on January 17, to kick off 2023 on a sour note for dairy farmers.

“Significant price gains across each contract period highlight that buyers were chasing product across the board,” said NZX dairy insights manager Stuart Davison.

The lift will add to the view that whole milk powder prices were expected to increase on the way into the second half of 2023, he said.

Whole milk powder, which peaked in March 2022 at $US4757/MT, rose 3.8% to an average of $US3329/MT – $US111 more than two weeks ago.Skim milk powder – Fonterra’s second-biggest reference product – remained flat, with an average of $US2829/MT, after a 0.3% drop last time.

All other reference products on offer were up, with the biggest increase coming from butter, which jumped 6.6% to an average $US4745/MT.

Similarly, anhydrous milk fat jumped 4.8% with an average of $U$5586/MT, while cheddar rose 2.3%, to an average of $US4980/MT.

Butter milk powder, which wasn’t on offer in the previous auction, rounded out the positive clean sweep, with a 2.0% increase to an average of $US2633/MT.

32,582 MT of product was purchased by 116 successful bidders.

In December, Fonterra narrowed and lowered its forecast for 2022/23 with a farmgate milk price range of $8.50–$9.50kg/MS and midpoint of $9.00.

In the same update, its forecast 2022/23 normalised earnings guidance was lifted to a range of 50 to 70c a share.

BNZ senior markets strategist Jason Wong said the latest sale was a “strong result in light of the rebound in the US dollar”.

The result “reduces some of the downside risk that has been developing for this year’s milk payout”.

According to Davison, north Asian participation boded well, with buyers taking nearly two-thirds of the total whole milk powder volume sold; 15% more of the total than the previous event and 5% more than at the equivalent event a year earlier.

He pointed to the 6.6% gain in butter prices, noting the last time butter made any gain was the November 1 auction, with prices sliding since then.