The latest Fonterra Global Dairy Auction on 16th December saw the overall GDT index rise by 1.3%. This followed a 4.3% jump two weeks earlier.
The keystone product that determines Farmgate Milk Price is Whole Milk Powder, and this lifted a further 0.5% to US$3210/ tonne. The last time WMP was above $3200/tonne were the short-lived peaks in both January 2020 and July 2020.
This rising GDT price combined with most farmers being ahead in production season to date by 2-3%; copious amounts of silage made and over 100m rainfall so far this month, means the Christmas Star has certainly been shining in favour of dairying.
As a response to the strengthening market Fonterra last week lifted the forecast Milk Price to a range of $6.70 – $7.30/kg milk solids.
The main cloud on the horizon is the NZ dollar which has been firming against the US dollar, moving from 68 cents to 71 cents over the past 4 weeks. A broad rule of thumb is that every cent of upward movement in the dollar translates to -10c/kgMS milk price. A reversal back to the mid-60’s would be welcome for all exporters.