Prices at the GlobalDairyTrade auction surged — led by whole milk powder — helped by a cut to offers from Fonterra, New Zealand’s largest milk co-op.
The latest GDT auction, which is operated by New Zealand milk giant Fonterra, showed prices overall up by 12.7 per cent from the last auction, held two weeks ago.
Whole milk powder prices rose by 18.9 per cent over the same period.
Physical leads futures
The rise in physical whole milk powder prices followed on from a strong gain on the New Zealand futures markets.
But the physical rally exceeds expectations, breaking a trend where commodity milk buyers have proved to be less bullish than speculators on the futures exchanged.
Ahead of the auction, Tobin Gorey at the CBA, noted that Fonterra trimmed the amount of whole milk powder it will offer over the next 12 months by some 1.8 per cent.
Mr Gorey said this “should provide some additional support to prices.”
Whole milk powder leads rally
Whole milk powder has been outperforming skimmed milk powder over the past three auctions, bringing the premium of whole milk powder to $667 a tonne.
This is the highest premium of whole milk powder to skimmed milked powder, and is at the highest level since October 2013.
The whole milk powder market is tightening globally, as output from New Zealand, which is by far the world’s biggest exporter, is shrunk due to falling milk output, due to lower farm-gate prices.
According to the European Commission, whole milk powder exports from New Zealand were down 6 per cent in the January-to-May period, compared the same time last year.
And demand from the world’s top whole milk powder importers is booming as China has returned to the market in full force, following a long period of depressed imports as the country worked through heavy stocks.
Chinese whole milk powder imports were up 20 per cent in the January-to-May period.
Demand from Russia is also up by 8 per cent over the January-to-May period.