Dairy prices rise 3.6% at GDT auction; US manufacturing contracts for first time in years; US car sales on track to reaching record highs; UST 10yr yield 2.18%; oil and gold stable; NZ$1 = 66.7 US¢, TWI-5 = 72.4

Dairy prices rise 3.6% at GDT auction; US manufacturing contracts for first time in years; US car sales on track to reaching record highs; UST 10yr yield 2.18%; oil and gold stable; NZ$1 = 66.7 US¢, TWI-5 = 72.4

Here's my summary of the key events overnight that affect New Zealand, with news dairy prices have risen 3.6% at the GlobalDairyTrade auction overnight.

Rising to US$2,419 per metric tonne, this is the first gain at the fortnightly auction since the beginning of October. The price of Whole Milk Powder (WMP) – New Zealand’s main export – rose by 5.3% to US$2,260. Yet a drop in the US dollar overnight means gains in New Zealand dollar terms are much more subdued at 1.9%.

AgriHQ dairy analyst Susan Kilsby says that while we have seen a solid lift in prices at this auction, the market remains weak due to the sheer volume of milk that’s being produced across the globe.

The US dollar has fallen following new data out overnight showing US manufacturing contracted in November for the first time in 36 months. The Institute for Supply Management’s national factory index fell, as the sector buckled under the weight of a strong dollar and spending cuts in the energy sector. The report shows 10 of 18 manufacturing industries reported contraction, with lower new orders, production and raw material inventories accounting for the overall softness during the month.

Yet the US economy remains on firm ground, with car sales on track to reach their highest November sales volume since 2001. Auto makers posted modest gains last month, as Black Friday deals got people buying. Car shoppers continue to drive away in larger, pricier vehicles amid low interest rates, cheap fuel and a stronger economy. Analysts say the month’s tally will indicate whether 2015 could set the all-time annual record.

In New York, the UST 10yr yield benchmark has dropped back to 2.18%.

The US benchmark oil price is unchanged at US$42/barrel, while the Brent benchmark is at US$44/barrel.

The gold price remains stable at US$1,065/oz.

The New Zealand dollar has gained nearly a cent, reaching 66.7 US¢. It’s also up to 91.2 AU¢, and at 62.9 euro cents. The TWI-5 has jumped to 72.4, its highest level in a month.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ». And don't forget to vote in the Flag Referendum.

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10 Comments

Total quantities sold for all products at the December 1st event of 28,158 MT were 6.3% below the previous auction and the lowest amount of product sold since June.
Volumes also remained lower on a seasonal basis as total quantities sold for all products within the first auction of December were 24.6% below last year’s average volumes sold for the month of December and 38.4% below the previous three year average December quantities sold.
https://secure.attenbabler.com/wordpress/wp-content/uploads/2015/12/Mont...

In other words, Fonterra hoards stocks to pump GDT price artificially.

At these prices and an FX = 0.67 WMP is about NZ $ 3.40 kg.

For a powder purchaser here in NZ making infant formulae this beats paying for the milk, picking it up and then drying it.

May also have to purchase Lactose to bring it to traded spec.
Fonterra 2013 reports US $ 604 m which will be a lot higher at lower NZ $.

Alternatively it means that Fonterra can only pay $ 3.40 * 1.9 = $ 6.50 minus collection, minus drying, minus any Lactose, minus OPEX at the margin for whole milk destined for WMP.

I suggest this is a much smaller number than $ 5.00.

( Corrected THX to Colin )

JB, your ratio is way out.

WMP's main component is lactose and lactose is not counted as a part of Milk Solids.

Work on a ratio around 1.9 WMP:MS and you will be in the ballpark.

THX Colin

Car sales figures quite frankly do not excite me - No Interest Deals and myriad other incentives to buy.
How about some stats on "Unsold Cars" around the world. Remember the big explosion in China earlier this year - right by and dealt to a huge "holding paddock" for cars.
Sorry not buying into those stats.

Well car sales are a pretty good indication of future intentions wrt CO2 emissions.

Yet the US economy remains on firm ground, with car sales on track to reach their highest November sales volume since 2001.

Economists can produce the most elegant and breathtaking statistical equations and regressions, but that makes them experts in statistics and math with little application in the real world. They are no trusted source on how an economy actually works, a fatalistic flaw that extends first from their determined ignorance about finance and money. You might understand this weakness for seeing it for the first time, but this has been constant year after year – let alone the same exact pattern repeating of 2008. Perhaps it is most fitting that economists were so absolutely sure about the unarguable growth and global recovery that was coming for 2015 only to have seen it turn further and further away from that. Their models are truly something to behold, just not with any relevance to any real economy. Read more

For first time since 2009 global international trading falls year-adjusted from 138.6 to 138.1

http://www.cpb.nl/en/number/cpb-world-trade-monitor-september-2015