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Futures prices for whole milk powder (WMP) traded on the NZX exchange in New Zealand improved by a modest 3% over the last week to reflect the upturn in the GDT at last Tuesday’s auction. However, although any improvement in the dairy futures market is welcome, these gains are only incremental and do not point to any immediate or meaningful recovery in milk powder prices.
Futures prices for WMP can act as a proxy for the performance of the biweekly GDT, as WMP accounts for half of all product sold via the GDT auction platform.
Without any meaningful signs to indicate either a sudden surge in demand for dairy or a significant event that will slash supply, market prices are likely to remain challenged. As we move into the stage of the season where northern European milk production begins to surge, there are simply no indicators in the market that point towards any material price movement.
After retaining a positive outlook for much of last year when the downturn in milk markets first began, Rabobank has changed the tune of its forecasts for the dairy sector this month, saying its outlook for the industry in the year ahead was “pessimistic”.
Having previously forecast a lift in dairy markets in the latter half of 2016, the Dutch lender has now changed its position, saying it expects global dairy markets to remain weak throughout all of 2016 and that any recovery in prices would not happen until 2017.
“Continued low oil prices, the weakening of many currencies against the US dollar, economic turmoil in Latin America and ineffective fiscal support mechanisms in Europe have all played a part in reducing buying power and, as a result, reduced purchase quantities,” said Rabobank.
A world drowning in a sea of milk – trying to stop a ripple becoming a tsunami
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