Dairy analysts report that higher prices in the Global Dairy Trade (GDT) auction and a weaker New Zealand dollar (NZD) against the US dollar are boosting forecasts for the farmgate milk price.
In the first November GDT auction, the index rose 4.8%, with butter prices leading at an 8.3% increase, followed by anhydrous milk fat at 4.6% and whole milk powder at 4.4%. Seven of the eight traded dairy commodities saw price increases, with only lactose showing a 6% drop.
ASB senior economist Chris Tennent-Brown noted that his milk price forecast of $9.20/kg now faces upside risks, suggesting that Fonterra likely has most of its forward sales hedged around US61c. With the NZD slipping below US60c, this hedging position will provide further support through the season and into the next.
Meanwhile, Westpac industry economist Paul Clark stated that their $9.00 forecast hinges on steady demand and increased global production. He noted that New Zealand’s milk production for the first four months of this season is 6.3% higher than last year, and an increase in US production alongside a surplus in China may contribute to price moderation, despite recent GDT gains.
NZX dairy analyst Rosalind Crickett highlighted a notable butter price rise of 18% for the December contract period, driven by decreased butter output in the US and Europe. “Market signals, including those from Pulse and SGX-NZX Futures, indicated a price lift,” she noted, adding that pre-holiday demand and upcoming US election results have likely intensified trading activity.
