Wholemilk powder prices – which have the biggest bearing on Fonterra’s farm gate milk price – rose by a whopping 18.9 per cent to US$2695 a tonne – well above futures market pricing which suggested a 10 per cent gain was on the cards.
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Dairy prices lifted by 12.7 percent overnight. The currency rose to 72.45 USA cents at 5:47 p.m.in Wellington Tuesday ahead of the GDT auction, which is held during the European day.
Dairy product prices have soared at Fonterra’s GlobalDairyTrade auction amid signs that the worldwide supply glut is easing, bolstering optimism about the outlook.
Prices were also strong this time a year ago with a whole milk powder price of $US2824 a tonne in October, which dropped to $US1890 in February and then the season ended on a dismal payout of $3.90kg/ms.
The kiwi rose to 94.05 Australian cents from 93.79 cents late yesterday as the Reserve Bank of Australia released the minutes of its last policy meeting where it cut the cash rate to a record low 1.5 percent.
The New Zealand dollar last traded at 72.69 USA cents at about 12.52pm in NY, compared with 72.11 U.S. cents at 5pm in Wellington the previous day.
“The futures market was pointing to a big one, as it turns out it was even bigger than we expected”. It rose to 55.94 British pence from 55.53p, gained to 64.44 euro cents from 64.31c and advanced to 72.96 yen from 72.68 yen.
ASB had predicted that the last Global Dairy Trade would reflect dairy futures markets and post a strong increase in prices and that WMP could rise by between 5-7% (which it surpassed).
“I think it is now safe to say the market has turned a corner”.
The market saw a similarly big gains in price, followed by an equally sharp decline, this time a year ago.
“While the recent strength in prices will certainly bring a smile to the face of farmers in the beleaguered dairy sector, we’d continue to sound a note of caution”, they said.
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At this stage, Co-operative group Fonterra is still forecasting a payout of NZ$4.25/kg for the 2016/17 season, although most analysts are expecting that there will be an increase in estimates later in the season. The group now forecasts a payout of NZ$4.25 per kilogram for this season, but most analysts predict that will be exceeded. Sliding prices have put farmers under pressure, with more than 85 percent estimated to be operating below breakeven levels.
