The word on the ground is that there is a growing belief that Germany and France’s low milk volumes aren’t likely to recover any time soon.
Align this message to the rising costs for feed, fertiliser and other variables and the high-cost production centres such as the Netherlands and Denmark will also slow volumes.
The Global Dairy Trade (GDT) all-commodity price continues to soar on the back of seven consecutive increases and 10 out of the last 11 on the platform.
After the latest 3% increase for the auction on 16 February, the average has risen to $3,746 (€3,100), its highest level since June 2014, and to its 12th-highest price since 2014.
Whole milk powder (WMP) is now at its the highest price since May 2014.
At the start of February, Fonterra lifted its farmgate milk price prediction, with the mid-price settling at $7.20/kg MS (30c/litre).
The Fonterra boss said at the time that the lift is a result of strong demand for dairy, which is demonstrated by the continued increase in GDT prices since the co-op last revised its milk price at the beginning of December and the markets have gotten better since.
He also said they’ve seen strong demand from China and southeast Asia for WMP and skim milk powder (SMP), which are key drivers of the milk price.
End of NZ season
They are coming to the end of the season in New Zealand now, so they are watching Europe to see what is happening with volumes over here.
There is no wave of milk coming out of Europe yet.
Fonterra will provide more detail on its overall performance and full-year earnings guidance when it announces its 2021 half-year results on Wednesday 17 March.
The Kiwis are also making a token gesture to sustainability in milk price from June.