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Rabobank commentary - GDT Event 15 May 2018

Rabobank commentary - GDT Event 212 | 15 May 2018

Rabobank dairy analyst Emma Higgins on the latest GDT Event

The final GDT Event for the 2017/18 production season ended with the GDT Price Index up almost 2% to USD 3,637/tonne.

SMP cracked the USD 2K mark (USD 2,047/tonne) and WMP results were slightly up (+0.2% to USD 3,226/tonne). Oceania SMP still priced ahead of US and EU priced product. Fats continue to fly high, with AMF up almost 6% to USD 6,354/tonne and butter 2.4% to USD 5,787/tonne. Europe is short on fats with a delay in spring production and so low volume is helpful for Oceania price support.

As we flagged last GDT Event, we are moving into the quieter months for NZ production and therefore fresh product for the GDT. Any major price movements will be influenced by the urgency of buyers looking to obtain product prior to the new season.

Some factors for the New Zealand dairy sector to consider as we move into the new production season include:
• Competitive currency changes in the Euro. With European spring production starting to lift in places, a weaker Euro will be helpful for EU exporters to looking to offload product. German milk production has moved ahead for 2018 v 2017, while French milk production is struggling to gain traction on last year.
• The recent weakness in the Kiwi dollar is also helpful for exporters. In terms of impact on the milk price, the weaker currency will have a greater effect on next season’s milk price (2018/19) than this season's. Our milk price forecast of NZD 6.40/kgMS is based on 72c (spot at the time of calculating).
• Another EC SMP tender of intervention product has been held. Hopefully the results (once released, potentially on Friday) show more aged product moving out of warehouses, which will help to see the gap between fresh SMP and old continue.
• Brexit will see some changes to the EU budget and so there could be a resulting change to the support payments that EU farmers receive. At this stage, there is a proposal for a cut of 4% to direct payments for EU farms for the period 2021-2027.

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