The bet to remove 1,000 tonnes of whole milk powder (WMP) from last night’s Global Dairy Trade auction has paid off for dairy giant Fonterra.
Overall, prices rose 2.0%, led by a 3.7% gain in WMP, which averaged US$3,733/MT.
However, despite the increase, the product is more than $1,000 below its March high of $4,757/MT.
Skimmed milk powder (SMP) – Fonterra’s second benchmark product – fell 0.7% to an average of US$3,547/tonne.
Anhydrous milkfat (AMF) – which jumped 13.9% in the previous event – gained another 4.0%, averaging US$5,901/MT.
The spread in butterfat widened with butter – which stood at US$7,086/MT in March – slipping 0.2% to an average of US$5,356/MT.
Cheddar cheese continued its relatively steady rise, rising 2.1% to reach an average of US$5,147/MT.
Buttermilk powder, lactose and sweet whey powder were not offered at this event.
26,106 tons of products were purchased by 113 successful bidders.
Fonterra will publish its annual financial results and confirm the final payment for 2021/22 tomorrow morning.
NZX Dairy Insights director Stu Davison said the positive performance of WMP, AMF and cheddar cheese came as no surprise, given the low prices the produce had been sitting on over the past few months.
Davison said demand in key markets remains “firm”, but he wouldn’t go so far as to say it’s “solid”.
The removal of 1,000 tonnes of WMP “definitely helped encourage the buy side of the market to be a little more active,” Davison said.
Mike Cronin, managing director of cooperative affairs at Fonterra, said the positive result was good news at this time of year.
“We have to remember it’s the second month of the new financial year and this start to the season… it’s good to see some of these trends,” he told The Country’s Jamie Mackay.
The result also complemented the co-op’s revenue update released earlier this week, Cronin said.
Demand from China was not as high as the market would have liked, but had “increased a bit,” which was promising, Cronin said.
“We’re hearing there might be a bit of restocking needed, so [there] there may be positive future trends there.”
The weather was affecting supply, with New Zealand “still quite wet” and Europe hampered by heatwaves – as well as regulations, he said.
“We’re not going to see a lot of milk hitting the market.”
Cronin was not concerned with a drop in the SMP, attributing the result to the “dynamics of us versus the EU at the moment”.
“We have some room for our skim milk to go up to reach those world prices.”
Overall, Fonterra remained bullish on the outcome, despite WMP falling US$1,000/MT below its March high, Cronin said.
“We’ve seen again throughout the season what it’s going to look like, and that obviously supports our current milk price, which is still quite healthy.
“When you see some of the signs of where the demand is going to come [from]… I think there’s probably a lot of room to stay pretty optimistic for the whole season.”