NZD and Dairy Auctions

Ever seen where dairy prices actually quantifies to NZD/USD, nope. How about a correlation. The effects to an auction on NZD. Dairy auction prices are based on the monthly average NZD  which means Dairy auctions contain little significance to overall NZD.

Does dairy mean Farm Gate Milk prices because those prices at February's NZD 49.40 are at highest levels since January 2015. Milk could mean Anhydrous Milk Fat, down 0.5 for the past year, Butter + 2.9, , Cheddar +6%, Lactose   + 1.2%, Rennet Cassein down 3.8%, Skim Milk Powder + 7.1 and Whole Milk Powder + 3.5%.  The whole or the parts could be the overall price driver.

The Milk season runs from August to April while May to July is the off period. The GDT Index since December hit highs at 1,076 NZD and lows at March 955.

The 2016 yearly average for Farm Gate Milk prices is 40.28 and NZD/USD 0.6971. The 2016 correlation is 73% and hits a brick wall at 91% and 94%.  January and February 2017 Farm Gate Milk price average is 49.59 against a current February  close at 49.40. At 49.40, NZD price should be 0.7379 while the overall range is located from 0.7198 to 0.7560. From 40.28, NZD should be 0.7105 and range from 0.6924 to 0.7286.

From February 2017 to February 2016, the Milk price average is 42.81 against NZD/USD 0.7069. The correlation drops to 72% and 91% and 94% remain brick walls to RHO correlations. NZD/USD based on 49.40 should be 0.7271 and ranges from 0.7197 to 0.6941. The Milk price should be 42.80 and ranges from 47.87 to 37.72. The range from 2016 to 2017 loses about 60 pip of deviation. The Milk price is overbought at 49.40.

The 2015 range for Milk was 39.91 to 32.09, subtract the 32.09 outlier then the range was 35 to 39. The highest price was June at 39. The 2016 range was 33 to 49 where June began the climb higher. From Feb 2017 to Feb 2016, the range was 33 to 49, subtract the 33 outliers then the range was actual 36 to 49. The NZD range was 0.6700 to 0.7300's. Month to month, Milk prices are extremely steady and don't move far from its nearest average while NZD moves 100's of pips from its nearest average.

Since 2007, NZD Farm Gate Milk prices traded and continues to trade far below USD milk prices.

A message from a trade service to subscribers to include fund managers is this week NZD prices will be determined by the Dairy auction. When the laughter ended, realization just how dangerous are these types became a reality. And none are ever called or questioned for lack of knowledge, wisdom and brains. Its scary to think these types handle money and are responsible for people's livelihood. Worse is blanket and generalized statements are never tested or quantified.