Milk prices at the GlobalDairyTrade auction appear to have found a bottom, after rising for the second session, with signs that markets have absorbed the fact that New Zealand production will not fall as rapidly as thought.
The Global Dairy Trade index, which tracks prices at the bi-monthly auction held by New Zealand co-operative Fonterra, rose by 1.6%, led higher by benchmark whole milk powder.
But prices for skim milk powder in New Zealand fell, as they give back all their premium to European prices, and then some, and opening up the discount of skim to whole milk powder to record levels.
Whole milk prices rally
But benchmark whole milk powder prices were up 2.4%, at $2,924, rising for the second session after an improving production prospect in Oceania took prices form their December highs.
“A steady auction would suggest the market has calibrated to the more modest falls in New Zealand milk production,” suggested Tobin Gorey, at Commonwealth Bank of Australia.
But skim milk prices were down 0.8% since the last auction event, at $1,913. This is the lowest level since June 2016.
NZ skim milk gives back premium to EU skim, NZ whole milk
Only a month ago, New Zealand skimmed milk prices were sustaining a hefty premium to EU and US prices, but that spread has sharply declined.
Skimmed milk powder prices in the EU stood at $1,983 a tonne as of March 19, with prices in the USA at $1,767.
The premium of whole milk powder prices to skim milk now stands at $1,011 a tonne, compared to just $6,64 a tonne a month ago.
The spread has only been this wide at two GlobalDairyTrade auction events on records going back to March 2010.