New Zealand whole milk powder futures are pointing to the first gain in GlobalDairyTrade auction prices since February after Fonterra, the world’s biggest dairy exporter, cut the volume it will offer.
August futures traded at $1,560 a metric tonne Tuesday in Wellington, up 7.6 per cent from a low of $1,450 following the previous auction on 4 August, NZX data show. Contracts from September to May are also trading higher than two weeks ago ahead of the next auction later today.
Fonterra this month dropped its forecast milk payout to New Zealand farmers to the lowest in at least 10 years after a global glut and weak demand from China drove global dairy prices to a 12-year low. The company said 13 August, it will offer a third less whole milk powder over the next four auctions, which may help to drive prices higher.
"It could be up double-digit in whole milk powder,” said Doug Steel, senior economist at the Bank of New Zealand in Wellington. “I wouldn’t get too carried away given where prices are, but it’s good to see some indicators pointing north for a change.”
The whole milk powder price fell to $1,590 on Aug. 4 - the lowest since the bi-monthly GDT auctions began in 2008 - while the quantity weighted price index fell 10 per cent to the lowest since December 2002.
Signs of slowing global production, including a forecast two per cent drop in New Zealand milk collection this season, may curb supply and support prices later this year.
“The cooperative was obviously not liking the near-term pricing,” said Steel. “If you believe the market is going to improve, and that’s their view, then you remove a bit of volume.”
News by Bloomberg, edited by ESM
