KRED

Wednesday, May 17, 2017

Dairy Prices Continue to Strength, rise 3.2 Pct Overall

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Dairy prices continued to strengthen, particularly for milkfat that has pushed to all-time highs on the GlobalDairyTrade platform. Dairy prices rose 3.2 percent overall, the fifth straight rise. Milkfat prices continued to outperform. Whole milk powder prices were up a modest 1.3 percent to just more than USD 3,300/tonne, while skim milk powder stayed the laggard, with prices rising 1 percent to a subdued USD 1998/Tonne.

Recent rises in prices have come against a backdrop of rebounding supply, particularly from New Zealand and Europe. Milk production is likely to continue trending higher in the remainder of this year, stated Westpac in a research report. Meanwhile, import demand has also been rebounding in recent months, particularly in China and in other regions such as Mexico and Algeria. However, higher supply is expected to be a drag on global prices later in 2017, added Westpac.

Along with a capped NZD/USD, the milk price is expected to come to $6.75/kg MS for 2017/2018, noted ANZ in a research report. The mile price for 2016-2017 might seem to have $0.15 to $0.20/kg MS upside also. It signifies of an improved cash-flow outlook, although any rise would set off Fonterra loan repayments from the deferred component to be repaid in 2017/2018 giving some offset.

According to ANZ, cashflow for the average fully-shared Fonterra supplier seems to be $5.75/kg MS in 2016-2017 and this is likely to rebound into the mid-$6/kg in 2017-2018.

“With breakeven for the sector in the low-$5s, the sector is moving back into the black and spare cash should start to emerge later this year”, added ANZ.

The material has been provided by InstaForex Company – www.instaforex.com

May 17, 2017 at 04:28AM

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