Dairy Skim – 7 June 2023 Global Dairy Trade Auction

Dairy Skim is a bite-size episode series where HighGround’s top analysts break down the latest dairy data release. Today, Stu Davison discusses the June 7th Global Dairy Trade Auction. You can read our comprehensive analysis here. Subscribe so that you never miss an episode!

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Transcript:

[00:04] Stu: Welcome to HighGround Dairy’s Skim podcast, your bite-sized dairy market update with me, Stu Davison, reporting from New Zealand.

[00:12] Right, Global Dairy Trade Auction 333 occurred on the 6th of June this week, the first event of the 23-24 New Zealand dairy season. The headline result of this auction was that the GDT index slipped 0.9% to 1,002 on the index with the average weighted price for the auction settling at $3,399/MT.

[00:33] Diving into the individual product classes, whole milk powder prices led the charge lower with the GDT whole milk powder index sliding 3.0%. Skim milk powder prices printed a flat result with the average tonnage price only easing $11/MT. Both milk fats managed to post a price increase with butter shifting 0.5% higher while AMF pushed 1.9% higher. Cheddar was the real winner, gaining 7.4% at this auction but the nearest contact period gaining a whopping 27.9% at this auction, over a $1000/ton margin on the nearest contract.

[01:08] In comparison to pre-auction market expectations, the futures market was a little overcooked for both milkfats and skim milk powder. However, light trading for whole milk powder and skim milk powder just prior to the auction did happen to promote better convergence than was listed at the end of last week. This auction’s result will likely see skim milk powder futures tick a little lower, milkfats unlikely to shift much and a check of whole milk powder prices over the nearest eight contracts. As a physical market discounts forward values of whole milk powder at this auction. As always, this will have a corresponding negative effect on the 2024 milk price future. At the time of recording this podcast, the 2024 milk price future had shaved $0.02/kilo milk solids in today’s trading, down to $8.28/kilo of milk solid. It must be noted that this is still bullish in Fonterra’s own forecast midpoint which printed at $8.00/kilo of milk solid recently.

[02:02] Diving into the drivers of this auction, a clear regional buyer shift is the key reason for the change in price with North Asian buyers falling from the top of the podium, being replaced by Southeast Asian and Oceania buyers taking the top step, securing almost 40% of the total volume sold. This weakened demand from North Asian buyers is highlighted in the bidding data with poor demand arriving for whole milk powder. North Asian buyers did manage to outweigh their way to the top buyers bought in the skim milk powder market, taking just shy of half of the total skim milk powder sold, while also seemingly having to push AMF and butter prices over the cusp of a positive result.

[02:37] We do have the next GDT event in two weeks’ time with similar offer volumes currently forecasted for that auction, not to mention another GDT Pulse event next week. On top of that, New Zealand’s milk will be flowing during July, less than a month away, and all eyes are now on how spring will play out for Kiwi farmers and how grass looks for the coming season.

Right, thank you very much for listening. Hang out for the next podcast, see ya.

Be sure to subscribe so that you never miss an episode. And if you’re interested in receiving more information, as well as our analysis, please visit highgrounddairy.com to request a free 30-day trial today. Futures and options trading involves substantial risk and is not suitable for all investors.

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