New Zealand dairy farmers will be cheered after global dairy prices jumped 4.2% in the overnight auction and whole milk prices hit the highest average price in the past five years.
“There is little doubt that this result will keep the global market in a frenzy and will see futures and milk price forecasts pushed higher, yet again,” said NZX dairy analyst Alex Winning.
The high milk prices bode well for farmers, with Fonterra poised to pay farmers a range of $8.90 to $9.50 per kilogram of milk solids, injecting about $13.8 billion into the NZ economy.
“The result will cement in expectations of a likely record payout at the top end of that range,” said BNZ senior markets strategist Jason Wong.
Wong noted farmers are also benefitting from the weaker NZ dollar, which is “resulting in extraordinarily high incomes for NZ commodity exporters who face the combination of high world prices and a soft NZD”.
The average Global Dairy Trade (GDT) price selling price was US$4,840 a tonne, with whole milk powder (WMP) lifted 4.2% to US$4,503 a tonne and skim milk power up 6% to US$4,295.
Fats also fared well, with butter up 5.1% to US$6,686 and cheddar up 3.5% to US$5,881.
The GDT price index has jumped 13.5% over the past three auctions while WMP has lifted 16.5%.
Prices are expected to go higher still.
“Current market expectations from the dairy derivatives market is for a further US$200/t to be added to today’s (WMP) price by the end of the current NZ dairy season. It seems that the market will continue to push higher, with little to stop WMP prices finding support in the meantime,” Winning said.
The season wraps up on May 31.
According to Winning, there was strong participation from North Asian and South East Asian buyers and African buyers returned strongly, “securing a monumental volume of WMP”.
