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Dairy auction: Glass half full or half empty? - ANZ

FXStreet (Bali) - According to ANZ, Tuesday's GlobalDairyTrade auction could be read either as the glass being half full, or half empty.

Key Quotes

"The results from the GlobalDairyTrade auction could be read either as the glass being half full, or half empty. There was a slight improvement in both skimmilk (+0.9%) and wholemilk (+0.6%) powder prices."

"The rises were concentrated in the near-term contracts, perhaps suggesting some restocking is beginning to take place as in-market inventories are run-down. But that was about as good as it got, with price declines for all the other main products and longer-dated contracts for milk powders."

"The current price levels for the products that make up the milk price, and the decline in longer-dated contracts for milk powder, are the biggest areas of concern. Current price levels and Fonterra’s assumed NZD hedging position translates into a milk price around the mid $4/kg MS mark. This is well below Fonterra’s current 2014/15 forecast of $6/kg MS, so you need to see an improvement in prices if this is to be achieved."

"While Fonterra have been optimistic of a bounce back, given recent auction results it is difficult to see them being able to hold this next week. Last night’s result might hold some hope that a turnaround is on the horizon, so the move might be more toward the mid-$5/kg MS, as opposed to the low-$5/kg MS at this stage."

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