Whole milk powder price extends 2015 rally to 43%

February 18th, 2015

By:

Category: Dairy

Cow.Cows.Dairy.Milk.Farm450(Agrimoney) – Dairy prices extended their rally at GlobalDairyTrade this year to 26% – led by a surge in whole milk powder prices back above $3,000 a tonne – although weak volumes have raised questions over the sustainability of the gains.

The GlobalDairyTrade index jumped 10.1% at Tuesday’s event, its strongest rise in 22 months.

The increase reflected a further jump in the market for whole milk powder, which represents the majority of product on offer at the twice-monthly auctions, and which saw prices soar 13.7% to a seven-month high of $3,272 a tonne.

Whole milk powder prices have now risen by 43% so far in 2015, although they have still recovered only about one-third of ground lost during last year’s rout.

‘Volumes tracking ever lower’

A rise in prices for a fifth successive auction had been forecast by many commentators, including Australia & New Zealand Bank, which highlighted the cut by Fonterra, which runs GlobalDairyTrade, to its forecast for dairy volumes to be sold through the event.

“With Fonterra’s daily milk volumes tracking ever lower, buyers will fear further cuts as the season draws to a close,” ANZ said.

Fonterra processes getting on for 90% of milk produced in New Zealand, the top milk exporting country, where dryness has undermined near-term output prospects.

Production prospects have slowed in some other milk producing countries too – the US last week trimmed by 200m pounds, to 211.5bn pounds, its forecast for domestic output this year.

World milk supply growth is returning to its medium-term trend of 1.9%, implying scope for a further 20-25% rise in GlobalDairyTrade prices above levels before today’s auction, ANZ said.

‘Demand starting to increase’

However, at INTL FCStone’s Chicago office, senior broker Dave Kurzawski was cautious over reading too much into GlobalDairyTrade gains.

“Demand is starting to increase in certain areas, although China is still comparatively quiet,” he said.

“But it seems like in most areas of the globe we have supply at least able to meet demand.”

As evidence of “sustainable” demand, “I would like to see more volumes at these high prices”, he told Agrimoney.com.

“I am not sure you are seeing the behaviour of buyers globally mimicking that you are seeing at GlobalDairyTrade.”

The overall volume traded at GlobalDairyTrade on Tuesday, at 22,957 tonnes, was the lowest since May 2013.

Add New Comment

Forgot password? or Register

You are commenting as a guest.