GLOBAL DAIRY SNAPSHOT ph +64 6 323 6393 email [email protected] web agrihq.co.nz OCTOBER 27, 2017 AGRIHQ WMP PRICE (US$/TONNE) NZX WMP FUTURES NOVEMBER 2017 (US$/TONNE) NZD:USD EUR:USD BALTIC DRY INDEX 3050 2940 0.684 1.165 1555 Milk production data out yesterday shows that Oceania production is faltering this season. Total NZ milk production was down 1.3% year on year in September, on a milksolids basis. This puts season to date production down 0.1%, as the falls experienced in August and September have outweighed the excellent results for winter milk production. Production in June and July was boosted by extra winter milk contracts being on offer, but since then extremely wet conditions have affected milk production. is is the third season in a row in which September production has fallen behind the previous year. Milk production is also expected to fall behind last year in October. NZ has only started to dry out over the past few weeks. Most areas now have more normal soil moisture levels, though there are still pockets where soil moisture is at field capacity, notably in Waikato – our largest milk producing region. Summer production should benefit from the high soil moisture levels and is expected to be up on last season. But the exceptional results of last autumn are unlikely to be matched in 2018, so NZ production will likely track behind last year at the tail end of the season. As a result, AgriHQ now expects no growth in milk production for the 2017- 18 season. Our previous forecast was for 1.5% growth. Australian production also fell in September, albeit by a relatively small amount of 0.6%. August figures were also revised and are a little better than previously reported at 0.9% up year on year. is puts Australia’s production at up 1% season to date. Victoria fell behind in September, as much of the state was quite dry. Australia’s milk production is expected to grow 2 – 3% this season. e NZ milk production figures should be supporting whole milk powder (WMP) prices, but this is yet to play out in the market, and in fact WMP looks to be coming down further. Prices for WMP futures trading on the NZX Dairy Derivatives market dropped below US$3000/t this week. e November contract settled at US$2940/t yesterday. All contracts for the rest of the season are currently priced between US$2900/t and US$3000/t. Some contracts have traded up between US$10/t and US$20/t this morning, but do still remain below US$3000/t. WMP prices have also eased in Europe over the past few weeks. European prices are higher than NZ’s, averaging US$3257/t this week, though this is down about US$250/t since the beginning of the month. There has been little urgency from buyers to secure WMP. We are at the peak of NZ’s season so there isn’t really a shortage of product right now, but product will start to become tighter going forward. China has been the only country that has been regularly buying WMP, but China will be buying now to land product while the lower tariff rate applies from 1 January. China’s WMP imports rocketed up even further in September, having imported 242% more product than in September 2016. e majority of the increase was NZ product, but China also imported more WMP from Australia, the US and Europe. European butter prices are coming down as fast as they went up. European butter is averaging US$6610/t this week, down about US$600/t from a week ago. e EEX market expects butter prices to come back further, reaching US$51715/t by January. Prices for butter futures on the NZX Derivatives market show a similar trend. The November butter futures contract is priced at US$5680/t, while the January contract is at US$5200/t. Oceania production falters high lights China’s imports jump, for another month WMP futures below US$3000/t Currency movements 0.6 0.8 1 1.2 1.4 Dec 16 Mar 17 Jun 17 Sep 17 NZD:USD AUD:USD EUR:USD AgriHQ Dairy Commodity Prices – US$/tonne fob This week Last week Four weeks ago Last year 27-Oct-17 20-Oct-17 Change 29-Sep-17 Change 28-Oct-16 Change Butter 5800 5800 ↔ 0% 6000 ↓ -3% 3980 ↑ 46% Skim Milk Powder 1800 1800 ↔ 0% 1975 ↓ -9% 2300 ↓ -22% Whole Milk Powder 3050 3050 ↔ 0% 3100 ↓ -2% 2800 ↑ 9% Cheddar Cheese 4000 4050 ↓ -1% 4000 ↔ 0% 3450 ↑ 16% Casein - Acid 7000 7000 ↔ 0% 7200 ↓ -3% 7200 ↓ -3% Anhydrous Milkfat 6800 6800 ↔ 0% 6800 ↔ 0% 5100 ↑ 33% Weighted Average 3220 3220 ↔ 0% 3310 ↓ -3% 2930 ↑ 10% Amy Castleton