The #312 event result from the GDT auction must be causing some concern to all involved in the dairy sector. Down -5.0% overall this is the third (and largest) fall on the trot with a combined drop total now of -10.4%.
Adding to the woes is the fact that the drops are led by SMP at -8.6% followed by WMP at -5.1%. The large drop in SMP has put the value of WMP ahead of SMP for the first in a few months which seems to rectify an anomaly
- Butter index down 2.1%, average price US$5,530/MT
- Cheddar index down 2.0%, average price US$4,825/MT
- SMP index down 8.6%, average price US$3,709/MT
- WMP index down 5.1%, average price US$3,757/MT
The milk powders demand is largely driven by China and some of the economic news coming out of China is showing that despite having COVID back under some control there are still issues with reports of their health systems also being stretched. No doubt this will still be impacting upon logistics and demand for consumables.
China’s economy grew +0.4% in the second quarter this year, the slowest pace since the country was first hit by the coronavirus outbreak two years ago. The continuing COVID presence show the potential of fresh risks from a resurgence in Covid infections, making it harder for the government to meet its 5½% growth target this year. Perhaps fuelled by COVID the biggest bug in the China system seems to be a growing number of people and developers going on a ‘mortgage strike’ with up to US$2 trillion of a $38 trillion market affected.
On the positive end the ASB are still remaining buoyant regarding milk demand and are sticking to their NZ$10 per milk solid (2022-23 season) citing low international supplies as being the main driver.
Sticking with milk prices Synlait contacted me a little concerned about the “smoke and mirrors” comment I made last week. They were at pains to point out that their transparency in payout predictions is as good or in their view better than competing companies and they generally follow a similar approach to Fonterra and the final payout cannot be determined for individual farms until all the seasons milk has come in and been assessed. To quote “milk price confusion happens when farmers try and look at a monthly statement versus the whole year”. Understandable and apologies for stirring the pot, perhaps unfairly, although I was just reporting farmer feedback.
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