Stu Davidson on overnight Dairy Trade auction

0:00Here with Harold now a business the global dairy trade auction overnight saw dairy prices drop I'm joined now by Stu Davidson from high ground dairy stew good to have you here because normally you'd be coming to us live from Chicago That's correct, but wherever you are though that drop was was visible right was sort of down 0.7% on the index. Yeah, it was a pretty decent drop on the index milk fats to the majority of the fall powders are actually better supported than we expected our skim milk powder especially continues to hold at a level a lot higher than last year Yeah, even though we sort of saw obviously that sort of wholesale milk price come back a bit You know points even I think it was yeah. Yep. What's the story here? What are we seeing? Yeah, the big part of this auction was China was actually as dominant as we've seen in the in the past They came through in Q1 really strongly really impressive Re-stock building in China and we saw this auction with Southeast Asia a lot of Latin American buyers and a little bit less Middle Eastern buying too, so but of a you know geopolitical shift happening in the background as well But just kind of see those regions moving around as well, so but good buying overall

1:03And the China backing away is that just because they've they've restocked effectively after loon in New Year They've done their thing. Yeah, correct They found themselves a little bit short at the end of 25 and they came in really strongly in Q1 You know, they did some really aggressive buying and then backing out now They still were the majority buyer at this auction, but they just sort of backed out slightly Not to be alarmed too far at this point. Yeah, they're there. They're buying They're just in a bit of spot than they were a little while ago So no, no alarm even though it's a bit of a surprise Yeah, the market had priced in a bit of a decline overall probably didn't price in the the decline in milk fats per se but there is a lot of butter in Europe and you know There's a lot of butter coming out of the US as well So it weren't too surprised on that front the strength of the homeic pattern market was actually pretty decent So not a bad outcome on that front Yes, our production was up in February wasn't it? Things still running pretty hot off farm. I think we're hearing that low stock numbers going into Into the freezing works and so for example, so that's you know Yeah, well milk prices that convinces farmers to keep cattle on farm for longer You know grass has been really good through summer

2:03So one of the you know best summers you could think about for growing grass and that's directly outcome for milk production in New Zealand But that's not New Zealand alone, you know The rest of the world is growing milk production too So we've got Europe at really strong figures The US grown really strong milk production Our friends in South America, Argentina and Uruguay Both grown really strong milk production at moment too So the world is not short of milk at the moment With all of that we're I think we're about a month out from getting Some sort of a forecast on the coming seasons Yep, farmgate milk price What any idea where that's going to land? Yeah, with the futures The milk price futures just traded under $9.50 in the last few sessions So bottom end of that range, $9.49, $9.50 So pretty solid price point at there A little bit of an expectation that the current geopolitical situation oil prices So and so forth logistics might weigh into buyers ability to consume products So that's put a bit of downwards pressure on the milk price But you know $9.40 in above That's still a solid milk price for New Zealand That would be three seasons in the sort of close to the tens really It's pretty outstanding That's right, you can't complain of those And the current seasons milk prices definitely result in a lot better outcome

3:04Then we were looking at the point of Christmas But we just did a better spot on the map On the globe to serve as some of those markets We are in a great spot to serve as China So, you know, China drives a lot of our market We have a very good tie in terms of political ties and trade ties And also market ties in terms of, you know, the products we supply And so that China bit is really supporting New Zealand's industry The free trade agreement is the underlying, you know, approach that We have tariff advantage, we have shipping advantage And you know, the situation with Europe and China at the moment Politically is not great And that's helping our market as well So a lot of works been down there in the last 20 years And it's paying off for us now