The result from last week’s GDT auction in New Zealand was flat for the second time in the space of a month. Despite a slight increase in the average selling price of WMP (+2%), declines in the price of skimmed milk powder (-1%), butter (-5%) and cheddar (-1%) all combined to keep the GDT flat.
However, the increase in the price of WMP would appear to have fed into dairy futures markets in the last week. Futures prices for WMP have jumped since last Tuesday with September, October and November contracts for WMP lifting 5% in the last five days.
While any upward momentum is welcome, the reality remains that milk powder prices are a long way off where they need to be and are struggling for a sustained price recovery.
More than any other dairy commodity, milk powder prices are exposed to the vagaries of the oil market as the major export demand comes from oil economies like Algeria, Nigeria, Egypt and Saudi Arabia.
Having broken the $50/ba mark in June, oil prices have slipped back almost 12% in the last month to sit below $46/ba this week. Until we see a sustained recovery in oil prices above at least $60/ba, milk powder prices will remain challenged.
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