Dairy prices have had a nice rally to start 2018 - ANZ

Analysts at ANZ explained that dairy prices have had a nice rally to start 2018. 

Key Quotes:

"Overnight, the GDT-TWI posted a 4.9% lift on a broad-based product increase, as offer volumes of WMP, SMP and butter over January to March were all decreased."

"However, it is a case of one positive offsetting a negative as Fonterra’s December milk collections came in at -5.5% y/y. So from a farmer’s revenue perspective, a price improvement has been required to compensate for lower production and higher supplementary feed costs due to the dry conditions."

 "We suspect recent rain, with more likely on its way, will turn things around in January/February, but additional supply is unlikely to be added back to the GDT platform. With milk supply growth running at 6% in Europe, we expect a return of NZ production growth will cap further short-term price improvements. Nevertheless, if recent price improvements can be held, this will make Fonterra’s $6.40/kg MS milk price more likely."