Unprecedented spread between SMP and WMP prices in Oceania [News Oceania n°7/2017]

Period: April 3 – 14, 2017

AUSTRALIA

• Milk production: is not expected to rebound during the remaining months of the current production season.
• Milk producers: a new, more stable relationship between farmers and processors is still evolving.

NEW ZEALAND

• Milk production: recent heavy rains and resulting very serious flooding have slowed production. Cyclone Debbie has taken the edge off a potential stronger finish to the season.

MILK PRODUCTION

• Australia *: -8.39% (Jul 16 – Feb 17 vs. Jul 15 – Feb 16)
• New Zealand *: -2.65% (Jun 16 – Feb 17 vs. Jun 15 – Feb 16)

BUTTER (82%): prices declined, moving closer to European butter pricing. Demand for butter from Oceania is still strong, while production in the region is somewhat constrained due to lower milk supplies. Some Oceania manufacturers of dairy products have changed product formulations to reduce the need for butter.

CHEDDAR CHEESE: prices declined. Somewhat lower buying interest was noted. Competition from U.S. and European cheese exports is increasingly mentioned as a factor.

SMP: prices weakened, moving closer to EU pricing. EU stocks of SMP continue to pressure pricing.

WMP:  average price is stable, while the range narrowed. Prices are believed to be about to strengthen. Buyers have increasingly become attuned to the potential that recent rain in New Zealand will slow milk production. This concern with lower volumes spiked interest in WMP.

As a reflection of the current high value of dairy fats, the spread between SMP and WMP prices has been noted by a number of observers. Currently in the range of $1,000, the rule of thumb had been that about $100 was typical. Historically, a spread of $500 rarely lasted more than 3 months or so. Presently few expect much shrinking of the $1,000 spread.

CLAL.it – The spread between SMP and WMP prices in Oceania

Note: · Assessments about market trend are expressed in US$; · * Dairy season: July, 1st – June, 30th (Australia), June, 1st – May, 31st (New Zealand).

Source: USDA summarized by the CLAL Team

More informations about milk production in New Zealand and Australia are available on CLAL.it

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About CLAL Team

The CLAL.it team is composed of young people who with the help of Computer Science study the dairy market and develop tools to provide the Operators of the dairy sector with a comprehensive real-time view of the national and international market trends.