Milk price still going up

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AgriHQ Read more on agrihq.co.nz

Fonterra’s forecast $4.70/kg milk price now looks attainable provided dairy commodity prices keep rising for the rest of the season, AgriHQ analyst Susan Kilsby says.

The AgriHQ Seasonal Farmgate Milk Price for the 2014-15 season increased by 15c/kg of milksolids to $4.70 after the overnight GlobalDairyTrade auction price index gained 10.1%.

The proviso to achieving the $4.70/kg MS was that dairy commodity prices continued to rise for the rest of the season at the rate indicated by the NZX Dairy Futures market.

Ahead of the auction WMP was trading on the NZX market at US$3700/t for the July 2015 contract.

“This suggests that prices still need to move up by another 10% for the $4.70 milk price to be attained,” Kilsby said.

“Dairy markets continue to gain ground rapidly as buyer demand increases at a time when the volume of product available on the GDT trading platform is very low.

“Buyers are looking to secure purchases now as they are aware milk powder could become more expensive in the coming months.”

The price movements at the auction were anticipated by the market. 

Before the auction the February 2015 WMP Futures contract was trading at US$3050/t, indicating the market expected WMP to gain 15%.

The gain realised was slightly less at 13% to produce US$3210/t.

Meanwhile, the market expected prices for skim milk powder (SMP) and anhydrous milkfat (AMF) to increase by no more than 4%.

SMP did a little better, gaining 8.4% and AMF gaining 6.4%.

The average selling price at the auction was US$3366/t. Demand was strong for the 22,957t of product sold with the auction lasting 14 rounds.