Stronger prices are translating into higher export volumes and values for New Zealand.
November delivered promising results for farmers in the dairy industry.
Milk production in New Zealand has continued to grow year-on-year (YoY), and with demand holding steady, prices have strengthened. This has been reflected in both the Global Dairy Trade (GDT) auction and the SGX-NZX futures market, where the milk price crossed the significant $10 mark.
For October 2024, New Zealand milk production increased by 2.1% YoY on a tonnage basis and 2.8% on a milksolids basis. Season-to-date figures now show gains of 4.2% and 5.0% on tonnage and milksolids, respectively.
Looking at other key regions, only Australia and the United States recorded YoY growth in October milk production, at 1.4% and 0.2%, respectively.
Meanwhile, Argentina and Uruguay saw YoY declines of 0.4% and 1.0%, respectively. Europe reported a 0.8% YoY decrease in September milk production, and China experienced a more substantial drop of 6.9%. These supply constraints in several key regions have played a role in supporting higher prices for New Zealand dairy products.
Demand at GDT auctions remained robust in November, driving the Price Index higher. Both whole milk powder (WMP) and skim milk powder (SMP) saw gains across Events and Pulse auctions in the month. Event 367 delivered a 4.8% Price Index increase, while Event 368 followed with a 1.9% rise.
Fat groups also performed strongly, though cheese prices softened in Event 368. The first GDT event of December (Event 369) showed mixed results, with WMP and lactose recording strong gains of 4.1% and 7.7%, respectively, lifting the overall GDT Index by 1.2% to an average price of $4193 USD/MT, while all of the other products saw decreases in their respective index. Encouragingly, demand from North Asia remains firm, underpinning these results.
This steady demand, coupled with tight supply in other regions, has driven prices for New Zealand products higher. The SGX-NZX market reflects this, with futures milk prices for MKP25 contracts surpassing $10 to reach $10.10 as of November 29.
These stronger prices are translating into higher export volumes and values for New Zealand. October export data shows total dairy volumes increased by 6.3% YoY to 331,866 MT, bringing the year-to-date (YTD) volume figure up by 1.0%. From a value perspective, October dairy exports surged 16.7% YoY, although the YTD value remains down by 2.0%.
The increase in commodity prices has been a key driver of higher export values, and we anticipate that total dairy exports will finish the year ahead of last year’s figures despite a slower start. Most other key regions have also seen growth in dairy exports, with Australia and the United States reporting YoY increases of 22.9% and 9.8%, respectively, in September. Argentina posted a 25.0% YoY increase in October exports, while Europe reported a decline of 6.6% YoY for its September figures.
Looking ahead, demand for dairy products from Asia, the Middle East, and Africa remains a crucial factor. For example, Algeria’s recent tender secured 30,000 MT of WMP (primarily from New Zealand) and 15,000 MT of SMP (from Poland) for delivery between February and May. New Zealand is well-positioned to meet this sustained demand as the peak of the season winds down.
Milk production remains solid, and higher milk prices are offering better margins for farmers. With a breakeven price estimated at $8.15, the current average farmgate price is providing much-needed relief after a challenging start to the year.
By Cristina Alvarado, commerical manager, data and insight at NZX
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