NZ: What will the weather deliver? - ANZ

Analysts at ANZ points out that short-term demand remained strong for NZ’s dairy products overnight, but buyers remain wary about future commitments.

Key Quotes

“This was highlighted by stronger results for near-term delivered product versus those for the coming seasonal peak for New Zealand milk flow. Short-term milk flows are often dictated by farm-gate prices, seasonality, general weather and supplementary feed prices. Apart from what the general weather conditions might deliver, all of these indicators look positive heading into the second half of 2017. This seems to have buyers cautious about making large forward commitments at present, preferring ‘hand to mouth’ buying. So not unlike other seasons, the weather looks like it will play a key part in price direction over the next six months.”

“More specifically, the weakening in WMP will be of concern, but not unsurprising given the lift in forecast supply. SMP rose as expected with lower than expected European production. Milkfat prices maintained their lofty heights and are unlikely to soften until after holiday period buying diminishes later in the year. All up, some caution is warranted on early season milk price forecasts until there is more certainty of the supplydemand balance during the seasonal peak.”