Figure 2: Whole milk powder price premium over skim milk powder
1500 1200 900 600 300 0
-300 -600
2008 Source: NZX
Hence the divergence in the price of WMP and SMP than SMP. From April last year up to the middle of
In July the price premium of WMP over SMP dropped SMP prices lifted a little at that time while WMP prices weakened, but this recent price trend is not expected to persist.
until stocks reduce to normal levels. Stocks are starting to decrease but still remain at historically high levels.
NZX runs the only derivatives market which trades WMP. At the end of July, prices for all WMP futures futures contracts for SMP were priced closer to between these two commodities is expected to
The stocks of SMP (and nonfat dry milk) lie mainly in Europe and the United States. The two other New Zealand and Australia. Dairy processors in Oceania tend to export all the excess stock they have irrespective of international prices. There are no government support programs to encourage companies to hold stocks and the farm-gate milk price structure also discourages processors to hold
The intervention program for commodities operated by the European Commission is designed to smooth prices by buying excess stocks when supply exceeds demand and, therefore, prices are low. This stock is then returned to the market when demand, and thus prices, are higher.
The combined volume of SMP in the European Commission’s intervention program, and that held in
European intervention stocks of SMP peaked privately held stocks had virtually dissipated.
Stocks of nonfat dry milk also build up in the United
EU intervention program. Stocks are now closer to
This year we have seen the market for SMP relatively balanced, with even the need to draw down stocks product leading to a drawdown of a small portion of the intervention stock.
The intervention stocks are not expected to equated to about half of the SMP produced in the EU have elevated a little further, indicating that the additional exports won’t put much of a dent in the intervention stocks. It will take a tightening of supply elsewhere in the world or a massive lift in demand for
Susan Kilsby E:
susan.kilsby@
nzx.com
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
27 | ADMISI - The Ghost In The Machine | July/August 2018
US$ per tonne
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