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SNAPSHOT ph +64 6 323 6393 email [email protected] web OctOber 27, 2017. AGRIHQ WMP. PRICE. (US$/TONNE). NZX WMP FUTURES.
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October 27, 2017











Oceania production falters

Amy Castleton

Milk production data out yesterday shows that Oceania production is faltering this season. Total NZ milk production was down 1.3% year on year in September, on a milksolids basis. This puts season to date production down 0.1%, as the falls experienced in August and September have outweighed the excellent results for winter milk production. Production in June and July was boosted by extra winter milk contracts being on offer, but since then extremely wet conditions have affected milk production. This is the third season in a row in which September production has fallen behind the previous year. Milk production is also expected to fall behind last year in October. NZ has only started to dry out over the past few weeks. Most areas now have more normal soil moisture levels, though there are still pockets where soil moisture is at field capacity, notably in Waikato – our largest milk producing region. Summer production should benefit from the high soil moisture levels and is expected to be up on last season. But the exceptional results of last autumn are unlikely to be matched in 2018, so NZ production will likely track behind last year at the tail end of the season. As a result, AgriHQ now expects

no growth in milk production for the 201718 season. Our previous forecast was for 1.5% growth. Australian production also fell in September, albeit by a relatively small amount of 0.6%. August figures were also revised and are a little better than previously reported at 0.9% up year on year. This puts Australia’s production at up 1% season to date. Victoria fell behind in September, as much of the state was quite dry. Australia’s milk production is expected to grow 2 – 3% this season. The NZ milk production figures should be supporting whole milk powder (WMP) prices, but this is yet to play out in the market, and in fact WMP looks to be coming down further. Prices for WMP futures trading on the NZX Dairy Derivatives market dropped below US$3000/t this week. The November contract settled at US$2940/t yesterday. All contracts for the rest of the season are currently priced between US$2900/t and US$3000/t. Some contracts have traded up between US$10/t and US$20/t this morning, but do still remain below US$3000/t. WMP prices have also eased in Europe over the past few weeks. European prices are higher than NZ’s, averaging US$3257/t this week, though this is down about

AgriHQ Dairy Commodity Prices – US$/tonne fob This week Last week

WMP futures China’s imports below jump, for US$3000/t another month

high lights

US$250/t since the beginning of the month. There has been little urgency from buyers to secure WMP. We are at the peak of NZ’s season so there isn’t really a shortage of product right now, but product will start to become tighter going forward. China has been the only country that has been regularly buying WMP, but China will be buying now to land product while the lower tariff rate applies from 1 January. China’s WMP imports rocketed up even further in September, having imported 242% more product than in September 2016. The majority of the increase was NZ product, but China also imported more WMP from Australia, the US and Europe. European butter prices are coming down as fast as they went up. European butter is averaging US$6610/t this week, down about US$600/t from a week ago. The EEX market expects butter prices to come back further, reaching US$51715/t by January. Prices for butter futures on the NZX Derivatives market show a similar trend. The November butter futures contract is priced at US$5680/t, while the January contract is at US$5200/t.

Currency movements Four weeks