GLOBAL DAIRY TRADE

WMP under performing; GDT 186

Commodity prices:

Some could be bored with some of my commodity commentary and the repeated references to supply-demand balance. The chart below, I think, is an interesting example of these factors.

Auction 185 - steady?

The last auction preview (auction 184) was titled “attempting to find a base”.  Notwithstanding that somewhat optimistic title, futures and price action ahead of the auction was suggesting further significant falls in both WMP (circa 4-6%) and SMP (circa 10%+).

Auction 184 - finding a base?

SUMMARY:

Another testing auction (183) ...

Dairy commodity markets

The last 6 weeks has proved more challenging than expected for both dairy commodity market and market forecasters.

GDT 182 - hold your breath!

The following blog is from JT Macfarlane who I introduced two weeks ago.  JT is keenly interested (and qualified) in commodity markets and is providing the below as a commentary on GDT; his motivation I think is mainly as a dairy farmer himself but is also as a Director of MyFarm....

Dairy commodity markets down

The following is a blog created from a regular newsletter provided by JT Macfarlane, a director of MyFarm.  JT is a dairy farm owner in his own right but he has a distinguished career as an investment banker and a particular knowledge of and interest in commodity markets.  He presented at the Grow your mind series of Seminars along with Brian Rice last year talking about how to manage with volatile commodity markets.

Down (and up) by the escalator?

The normal saying is, of course, "Down by the escalator and Up by the stairs" referring to market movements.  The escalator is the precipitous fall in prices that we saw in July and early August.  The stairs was supposed to be gradual price increases over the season.

The overnight gDT auction was very strong with the average index increasing by 16.5% and the crucial WMP market increasing by 20.6%.  This is the third in the row and we seem to be traveling back up much more quickly than most commentators considered likely.

It's a waiting game

We seem to be settling in for a tough 12 months with another gDT fall this morning.  The fall in itself isn't that significant at 3.5% - and good to see that WMP fell less (1.8%).  But it does emphasise that supply and demand is still out of balance and that farmers will need to really hunker down on costs through the remainder of the year.

From an investment perspective, we need to see rising prices.  In the absence of that, falling land values.

Two steps forward, two back

The 10.8% drop in prices at the global dairy trade auction last week unwinds the gains made in January and February.  It will put some pressure on the 2014/15 $4.70 and could affect the 2015/16 season open.

Two steps forward, one back

This morning the recovery in dairy prices seems to mimic the saying in this blog's title with gDT prices falling by 8.8%.  This follows successive rises since mid-December.  It appears that the fall wasn't triggered by the 1080 poison threat - rather simple supply and demand forces.

Fonterra had sent mixed messages to the market, whilst reiterating their forecast that milk supply would be down by 3.3% year on year, they increased their forecast volumes to be sold on gDT.