Stability in Milk Prices Amid Global Supply and Demand Dynamics
ASB is projecting a milk price forecast of $9.75 per kilogram of milksolids (kgMS), aligning closely with Fonterra's recently adjusted forecast, which ranges between $9.50 and $10.50/kgMS, featuring a midpoint of $10/kgMS. According to ASB's Chief Economist Tennent-Brown, this alignment indicates a concerted effort to monitor the evolving global supply and demand factors impacting dairy prices in the coming months.
Tennent-Brown comments on the risks surrounding their $9.75 prediction, noting that some risks lean towards a milk price near Fonterra's midpoint prediction, even if the prices experience a minor dip from their current standings. The dynamics of the New Zealand Dollar (NZD) also play a crucial role, suggesting that its decrease could modestly support this year's milk price and substantially assist the next season if the trend remains within the parameters expected in Fonterra's foreign exchange hedging strategy.
The prices of whole milk powder (WMP), a significant determinant of Fonterra's milk pricing, dropped over the last two auction events, with the first auction of 2025 observing dips of 2.1% in WMP and 2.2% in skim milk powder. Despite this, WMP persists at a solid US$3804 per tonne, marking the highest pricing since July 2022, where it stood at US$3961 per tonne.
Tennent-Brown emphasizes that although WMP prices have fallen from recent peaks, they are markedly higher compared to a year prior and above the historical averages. The recent Global Dairy Trade (GDT) auction recorded a price index decrease of 1.4%, settling at an average price of US$4,029 per tonne.
NZX dairy analyst Rosalind Crickett attributes the index's decline to the reduction in milk powder product prices, despite a rise in butter and cheese products, as anticipated before the event. This period usually represents a quieter start to the year, with 87% of available products sold despite weakened demand from regions like North Asia and Southeast Asia/Oceania.
Crickett further notes that, notwithstanding a 15.7% decrease in WMP and a 15% decline in SMP on offer since the last event, traders have cited a 'hand to mouth' purchasing approach by regions during the holiday season.
