GLOBAL DAIRY SNAPSHOT THURSDAY APRIL 13, 2017 ph +64 6 323 1512 email [email protected]web agrihq.co.nz AGRIHQ WMP PRICE (US$/TONNE) 2920 NZX WMP FUTURES APRIL 2017 (US$/TONNE) 3000 NZD:USD 0.6953 EUR:USD 1.0664 BALTIC DRY INDEX 1262 Trading on the NZX Dairy Derivatives market reached record levels this week, driven by price uncertainty as a result of recent adverse weather in New Zealand. Two cyclones have hit NZ in the past fortnight. Cyclone Debbie caused widespread flooding across the North Island with Northland, Bay of Plenty and parts of Waikato the worst affected regions. The same areas are now feeling the brunt of Cyclone Cook which is progressing down the island delivering heavy rain and gale force winds. The cyclones mean milk production will drop away quicker than would otherwise have been the case, but given autumn milk flows were abnormally high then this is likely to result in more normal milk intakes for the remainder of the season which draws to a close at the end of May. The uncertainty surrounding exactly what will happen with milk intakes fuelled record volumes of futures traded on the NZX Dairy Derivatives market on Tuesday. The daily volume for dairy commodity futures was 4060 lots (or tonnes) with a further 400 lots of whole milk powder (WMP) options contracts traded. The majority of the trading activity was in WMP futures where prices made some gains. The nearby WMP futures contract lifted US$70 over the past week to open today at US$3000/t. The May contract lifted even further gaining more than US$200/t in the past week. All WMP futures contracts dated out to the end of the calendar year are trading above US$3000/t. Milk price futures also benefitted from the rally in WMP futures. The majority of the action in the milk price contracts has been in the Sep 18 contract which relates to next season’s milk price. This contract traded at $6.10/kg milksolids (MS) today having gained 20 cents in the past week. The current season contract (Sep 17) has come up 2c in the past week to $6.03/ kg MS. Intervention providing short-term support Skim milk powder (SMP) prices have lifted slightly in Europe this week. SMP is now flowing into intervention which is providing short-term support to the market as it reduces the volume of product available for sale elsewhere. Germany and Lithuania pushed SMP to invention last week with 250t from Germany and 479t from Lithuania going into the European Commission support programme. This means now 1201t of the 109,000t quota for the season has now been filled. The 109,000t limit is expected to be reached within about six weeks as milk intakes across Europe continue to lift. Europe is not the only region struggling to deal with excess milk volumes. The strong run of prices in the United States has encouraged more milk to be produced which is pushing the limits of processing capacity in some regions. The extra milk will most likely end up in the cheese plants, but as their capacity is tested, more SMP or nonfat dry milk will also be produced. This will put downward pressure on the price of these two commodities. Susan Kilsby AgriHQ Dairy Commodity Prices – US$/tonne fob This week Last week Four weeks ago Last year 07-Apr-17 31-Mar-17 Change 10-Mar-17 Change 08-Apr-16 Change Butter 4860 4860 0% 4700 3% 2750 77% Skim Milk Powder 1950 1900 3% 2250 -13% 1750 11% Whole Milk Powder 2920 2900 1% 2825 3% 2000 46% Cheddar Cheese 3400 3400 0% 3600 -6% 2650 28% Casein – Acid 7400 7400 0% 7400 0% 6000 23% Anhydrous Milkfat 5900 5900 0% 5650 4% 3350 76% Weighted Average 3030 3010 1% 3010 1% 2080 46% → → → Inclement weather triggers record trading volumes high lights Milk price futures lift for next season NZ hit by another cyclone ↔ ↔ ↔ ↔ ↔ → → → → →→ → → → → → → → Currency movements 0.6 0.8 1 1.2 Jun 16 Aug 16 Oct 16 Dec 16 Feb 17 Apr 17 NZD:USD AUD:USD EUR:USD
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Trading on the NZX Dairy Derivatives market reached record levels this week, driven by price uncertainty as a result of recent adverse weather in New Zealand. Two cyclones have hit NZ in the past fortnight. Cyclone Debbie caused widespread flooding across the North Island with Northland, Bay of Plenty and parts of Waikato the worst affected regions. The same areas are now feeling the brunt of Cyclone Cook which is progressing down the island delivering heavy rain and gale force winds.
The cyclones mean milk production will drop away quicker than would otherwise have been the case, but given autumn milk flows were abnormally high then this is likely to result in more normal milk intakes for the remainder of the season which draws to a close at the end of May.
The uncertainty surrounding exactly what will happen with milk intakes fuelled record volumes of futures traded on the NZX Dairy Derivatives market on Tuesday. The daily volume for dairy commodity futures was 4060 lots (or tonnes) with a further 400 lots of whole
milk powder (WMP) options contracts traded. The majority of the trading activity was in WMP futures where prices made some gains.
The nearby WMP futures contract lifted US$70 over the past week to open today at US$3000/t. The May contract lifted even further gaining more than US$200/t in the past week. All WMP futures contracts dated out to the end of the calendar year are trading above US$3000/t.
Milk price futures also benefitted from the rally in WMP futures. The majority of the action in the milk price contracts has been in the Sep 18 contract which relates to next season’s milk price. This contract traded at $6.10/kg milksolids (MS) today having gained 20 cents in the past week. The current season contract (Sep 17) has come up 2c in the past week to $6.03/kg MS.
Intervention providing short-term support
Skim milk powder (SMP) prices have lifted slightly in Europe this week.
SMP is now flowing into intervention which is providing short-term s u p p o r t t o t h e m a r k e t a s i t r e d u c e s t h e v o l u m e of product available for sale elsewhere.
Germany and Lithuania pushed SMP to invention last week with 250t from Germany and 479t from Lithuania going into the European Commission support programme.
This means now 1201t of the 109,000t quota for the season has now been filled.
The 109,000t limit is expected to be reached within about six weeks as milk intakes across Europe continue to lift.
Europe is not the only region struggling to deal with excess milk volumes. The strong run of prices in the United States has encouraged more milk to be produced which is pushing the limits of processing capacity in some regions.
The extra milk will most likely end up in the cheese plants, but as their capacity is tested, more SMP or nonfat dry milk will also be produced. This will put downward pressure on the price of these two commodities.
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