The GDT auction result this week (+1.9%) was a further boost to already hot dairy markets.
Butter was up 3.5%, but, importantly, whole milk powder (WMP) and skim milk powder (SMP) were also both up, 1.9% and 1.4% respectively.
Remember, the last auction was up 4.3% and the one previous to that was up 2.2%, so in total over the last six weeks, we are looking at the auction just shy of +10% on where it was.
The significance of this is the timing – New Zealand is in peak milk and probably even coming down off the peak at the moment.
What could hamper markets now? COVID-19 is probably the outstanding piece that is still at play, which could impact.
If there were to be shutdowns in the food service sector, we could see product sent to retail similar to last lockdown.
The market is so hot now I’m not sure COVID could even cool the demand and prices at play.
In New Zealand, while weaker flows boosted sentiment, WMP output is unlikely to be seriously affected, with milk typically diverted from other streams.
Futures and recent GDT buying patterns had suggested pricing will stabilise around current levels, but this week’s results fly in the face of that with another 2% hike.
On the skim front, the thinking was pricing could push on relative to EU origin, skim powder and if this was to happen, which has happened this week, then it would require Chinese buying to remain at a high level.