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3 Feb 2015
Fonterra GlobalDairyTrade registers a 9.4% increase - ANZ
FXStreet (Bali) - After today's strong increase in the GlobalDairyTrade index, according to ANZ, it makes it much more likely that Fonterra will be able to deliver their forecast of $4.70/kg MS.
Key Quotes
"Overnight GlobalDairyTrade registered a 9.4% increase with the average weighted price moving to US$3,042/t. Whole milk powder (WMP) led the charge increasing by 19.2% to US$2,874/t, whereas skim milk powder increased by 6.7% to US$2,598/t. It seems the dry conditions in New Zealand and continued reduction in supply to be offered through GDT over the next six months has finally swung market sentiment."
"The increase in WMP was one of the largest seen since the recovery from the global financial crisis. So where to now? As we have said before dairy markets are very volatile in both directions. We had expected a more modest recovery to take place over the first half of this year to levels a touch above those reached last night."
"It seems the market could more quickly mean revert now, which makes it much more likely that Fonterra will be able to deliver their forecast of $4.70/kg MS. We are still a little cautious though as there was no premium placed on later delivery periods for milk powders when New Zealand supply will be at its seasonal lull. This implies some of the increase overnight was shorter-term order filling. Indeed reports on the demand front from the major powder importers are still not overly positive and this has us a little cautious."
"With this in mind a milk price between $4.50-$4.70/kg MS seems more likely in 2014/15 as opposed to just a few weeks ago. After interest costs this would still be below break-even for most dairy farmers and means cash-flow is still going to be lean through 2015 with only small deferred payments from July to October."
Key Quotes
"Overnight GlobalDairyTrade registered a 9.4% increase with the average weighted price moving to US$3,042/t. Whole milk powder (WMP) led the charge increasing by 19.2% to US$2,874/t, whereas skim milk powder increased by 6.7% to US$2,598/t. It seems the dry conditions in New Zealand and continued reduction in supply to be offered through GDT over the next six months has finally swung market sentiment."
"The increase in WMP was one of the largest seen since the recovery from the global financial crisis. So where to now? As we have said before dairy markets are very volatile in both directions. We had expected a more modest recovery to take place over the first half of this year to levels a touch above those reached last night."
"It seems the market could more quickly mean revert now, which makes it much more likely that Fonterra will be able to deliver their forecast of $4.70/kg MS. We are still a little cautious though as there was no premium placed on later delivery periods for milk powders when New Zealand supply will be at its seasonal lull. This implies some of the increase overnight was shorter-term order filling. Indeed reports on the demand front from the major powder importers are still not overly positive and this has us a little cautious."
"With this in mind a milk price between $4.50-$4.70/kg MS seems more likely in 2014/15 as opposed to just a few weeks ago. After interest costs this would still be below break-even for most dairy farmers and means cash-flow is still going to be lean through 2015 with only small deferred payments from July to October."