20 Jan 2015
NZ dairy auction encouraging for WMP - ANZ
FXStreet (Bali) - The Economics Team at ANZ provides their view on late Monday's NZ Fonterra dairy auction, noting that the auction was encouraging for WMP, but outside this price action remained poor for the other products.
Key Quotes
"Wholemilk powder prices (+3.8%) leapt into life overnight as Fonterra reduced supply through GlobalDairyTrade. There were gains across most of the contract periods too. The key question is whether tightening supply over the next several months will be enough to deliver their current farm-gate estimate of $4.70/kg MS."
"Last night’s auction was encouraging for WMP, but outside this price action remained poor for the other products. The run of good results for milkfat products looks to have done their dash as they have caught up to offshore prices from other sources and skim milk powder prices were little changed. For Fonterra to deliver the $4.70/kg MS milk price, milk powders need to lift by an average of 3.2% at each auction through to July."
"Whilst tightening supply from NZ is helping turn the tide and dairy markets can turn aggressively in either direction, there will also need to be a lift in end demand. We remain concerned about competition from Europe and weaker demand from key global importers, hence our recently downgraded forecast farm-gate price of $4.35/kg MS for the current season."
Key Quotes
"Wholemilk powder prices (+3.8%) leapt into life overnight as Fonterra reduced supply through GlobalDairyTrade. There were gains across most of the contract periods too. The key question is whether tightening supply over the next several months will be enough to deliver their current farm-gate estimate of $4.70/kg MS."
"Last night’s auction was encouraging for WMP, but outside this price action remained poor for the other products. The run of good results for milkfat products looks to have done their dash as they have caught up to offshore prices from other sources and skim milk powder prices were little changed. For Fonterra to deliver the $4.70/kg MS milk price, milk powders need to lift by an average of 3.2% at each auction through to July."
"Whilst tightening supply from NZ is helping turn the tide and dairy markets can turn aggressively in either direction, there will also need to be a lift in end demand. We remain concerned about competition from Europe and weaker demand from key global importers, hence our recently downgraded forecast farm-gate price of $4.35/kg MS for the current season."