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NZ: String of soft dairy auctions - ANZ

In New Zealand, the string of soft dairy auctions continued overnight, with the GDT-TWI falling for the fourth consecutive auction, points out the research team at ANZ.

Key Quotes

“Prices have now fallen 10% since early October. Weakness was broad-based, with the largest falls in casein (-12.6%), SMP (-6.5%) and butter (-5.9%). WMP prices fell 2.7%, with similar-sized falls across the curve. In fact, with the exception of the most near-dated contract, forward prices are now all below US$2,800/tonne. It is clear the market is nervous about rising global supply.”

“European supply is increasing on the back of higher farmgate prices and favourable seasonal conditions, and local supply is improving too. It is our expectation that WMP prices find some support around this level, although one of those reasons is that WMP was looking cheap compared to a SMP/milkfat combination, and that relativity closed a little at this auction. Ultimately, it sets the scene for Fonterra to downgrade its milk price forecast for 2017/18 early next month to close to our current forecast of $6.25-$6.50/kg MS.”

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