The latest Global Dairy Trade (GDT) auction showed a 3% rise. It was the 7th increase in a row. Over that period, the overall prices have bounced 22.9% higher. Also, prices are around 20% higher than a year ago. There were rises in all commodity groups. Whole milk powder was up 4.3pc to USS 3,615 a tonne, its highest level since June 2014. Nathan Penny, Senior Agri Economist at Westpac NZ, points out that prices across a range of sectors are firm and getting firmer, with dairy leading the charge. Underlying the strength in export prices is the surging Chinese economy, Penny emphasizes.
But growth in South-East Asian economies is not far behind, Penny says, further underpinning demand for New Zealand dairy products. “The global rollout of Covid-19 vaccines will give global food demand a second ‘shot in the arm’, particularly from other secondary dairy markets.“ However, global food supply is struggling to keep up with surging demand, causing high grain (feed) prices. “That is going to constrain the global supply of dairy,” “We think that this dynamic also has further to run and will add to the upward price pressure over the first half of 2021.” Penny expects that ultimately, global food supply will respond, moderating dairy prices from late 2021 and into 2022. Senior Analyst Michael Harvey of Rabobank Australia says there has been real strong consumer demand for white milk in China. “Some of the big dairy companies in China are reporting double digit increases in UHT milk sales. That is slightly in contrast to what we’ve seen in other markets in the world.“ There has been big jump in export of milk from Europe to China recently, Harvey points out. Harvey says that on the short term, there are some headwinds for exporters. “The margins for some dairy companies in China are under pressure. The costs of local milk is near record levels, largely driven by big lifts in the costs of feed. Looking ahead, we open our forecast for the 2021/2022 season at NZ$ 7.30 (US$ 5.34). With demand proving resilient, we expect dairy prices to remain elevated.”