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Flat auction, damp whole milk powder

Key highlights

The overall GDT auction outcome was flat, but whole milk powder prices fell 4.5%.
Prices of European-influenced products rose, in contrast.
We continue to expect a steady rebalancing of supply to drive prices higher over time.

Report prepared by:

Nick Tuffley, ASB Chief Economist
Phone: +64 9 301 5659
Email: nick.tuffley@asb.co.nz

The overall GDT auction outcome was flat, though the most important price for NZ – whole milk powder (WMP) – fell for a second time in a row. NZ dairy production held up surprisingly well at the end of last season. But, looking ahead, the relatively weak opening forecast from Fonterra for this season is likely to prompt a more material fall in NZ production this season.

Dairy production is also likely to fall in other important production markets. Australian farmers have been abruptly hit by a farm-gate milk price cut. Argentinian production is also expected to fall. In Europe we expect reality to increasingly sink in after the initial post-quota surge in production there last year.

Consequently, we continue to expect global dairy prices to track higher over the next year.

Read the full PDF Report

Important Disclaimer - The views expressed herein are those of the authors and are based on information believed but not warranted to be correct. Any views or information, whilst given in good faith, are not necessarily the views of ASB Bank Limited and are given with an express disclaimer of responsibility and no right of action shall arise against any of the authors, ASB Bank Limited or its employees either directly or indirectly out of any views, advice or information.
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