Whole milk powder may rise in next week's GlobalDairyTrade auction

Friday 2nd December 2016

The price of whole milk powder, New Zealand's key commodity export, may rise for the fourth straight auction on the GlobalDairyTrade platform next week on the expectation future European milk production will be crimped by environmental curbs.

Whole milk powder futures for December last traded at US$3,480 a tonne, a 2.1 percent premium to their previous GDT level and implying prices will advance at Tuesday night's auction, according to AgriHQ senior dairy analyst Susan Kilsby.

Prices for whole milk powder have picked up in the second half of this year after a prolonged slump, as demand and supply move back into balance. The average price for whole milk powder has jumped by almost two-thirds since mid-July and recent news that farmers in the Netherlands will have to reduce cow numbers by about 11 percent next year to meet European Union phosphate limits has given the futures market a further boost ahead of next week's auction.

"The one thing that we have seen in the last week or so which is positive for dairy commodity prices is that the Netherlands will have to reduce their cow numbers next year to meet phosphate limitations," Kilsby said.

Rising dairy prices had been expected to prompt farmers in Europe to boost milk production, with Ireland and the Netherlands typically the biggest contributors to growth, Kilsby said.

"We were a little worried that we would see quite a boost in production again from Europe next year," Kilsby said. "That's taken one of the big contributors out of the equation. While we are expecting some growth out of Europe next year, that will curb some of that growth.

BusinessDesk.co.nz

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