Global Dairy Trade auction result 'good news' - Rabobank

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Although the global economy is reeling from a "corona hangover", it's not all bad news for the dairy industry says Emma Higgins.

Rabobank's dairy analyst told The Country's Jamie Mackay the latest Global Dairy Trade Auction result was "good news", despite it being the fourth consecutive drop.

"Things could have been much, much worse considering what's happening globally with Covid-19 at this point in time," said Higgins.

Dairy product prices fell by 3.9 per cent while the price of wholemilk powder fell by 4.2 per cent to US$2797 a tonne - its lowest point in more than a year. Skim milk powder fell by 8.1 per cent to US$2527 a tonne.

Rabobank dairy analyst Emma Higgins. Photo / Supplied

However, Rabobank remained cautiously optimistic due to a rise in Chinese demand for dairy products.

Demand was "showing signs of spluttering back to life" said Higgins, who pointed out it had risen by around 43 per cent this GDT event.

Meanwhile China's demand for wholemilk powder jumped 60 per cent, while skim milk powder rose 40 per cent, said Higgins.

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Rabobank's forecast milk price had been lowered from $7.60 to $7.35, which was "still very healthy", although the future was still uncertain said Higgins.

"In light of the way that the markets have moved however, it's prudent to really note that that $7.35 is still a little bit tentative ... because the market's moving so quickly, we are at risk of our Quarterly Forecast ... being at risk for Quarter One and perhaps Quarter Two as well."

Despite this, Higgins said the exchange rate could make all the difference.

"The dollar could be the saviour here, but particularly moreso for next season and that's where we have to start looking forward to now, because most of New Zealand's supply has already been contracted and Fonterra has said as much ... this morning in their interim announcement."

Also in today's interview: Higgins talked about how drought could affect Fonterra's milk collection.

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