The derivatives market has had a patchy record as a bellwether for the physical market in recent months, but at last week’s GlobalDairyTrade (GDT) auction the market was largely on the money.
The auction saw the GDT price index gain 6.6 per cent while whole milk powder prices, which have the biggest bearing on Fonterra’s farmgate milk price, rallied by 9.9 per cent to US$2265 a tonne.
Analysts were encouraged by the last sale’s outcome, but they stopped short of calling it a turning point as the market has suffered a series of false starts over the last two years.
There were big moves in NZX whole milk powder futures yesterday, with the August contract gaining US$5 to US$2245 a tonne, September rising US$90 to US$2530 and the October contract rising by US$120 to US$2650.
Further out, November was up US$85 to US$2680, December was up US$100 at US$2700 and January was up US$90 at US$2710. Wholemilk prices need to get back to around US$3000 a tonne before farmers can get back in the black.
The August to December «contango» – the difference between the short end of the market and the longer-dated contract – has widened US$100 out to US$455 a tonne.
«There are large premiums being built into the futures over the last GDT suggesting another large rise is on the cards,» said Nigel Brunel, director financial markets at OM Financial.
«Even though we are a week away from the next GDT – momentum appears to be in place suggesting we could get a repeat of the last event.»
Source: NzHerald
Link: http://www.nzherald.co.nz/the-country/news/article.cfm?c_id=16&objectid=11690878
