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Highlights
- A 5.1% surge in global dairy prices underpinned by tight milk supply and the Russia- Ukraine conflict.
- The a2 Milk Company reveals its Chair to now be an independent director.
- Synlait Milk to announce its HY22 results in April.
Dairy prices have spiked to a record high of 5.1% at the auction pertaining to the Global Dairy Trade. This might prompt a hike in speculation milk payments to farmers this season.
It is noted that dairy prices have been increasing, majorly on account of tight milk supplies across NZ and globally. The Russia-Ukraine war could push prices even further.
As a result, for the current season, the largest dairy exporter worldwide, Fonterra, has forecasted a record farmgate milk payment to farmers, which might continue for the next season too.
It is seen that the average price for whole milk powder, skim milk powder and butter rose 5.7%, 4.7%, and 5.9%, respectively.
Source: © 2022 Kalkine Media® data source- EODHD/Others
Amid this backdrop, let us walk through the top three NZX dairy stocks that can be considered.
The a2 Milk Company Limited (NZX:ATM, ASX:A2M)
NZ’s premium dairy nutritional company is The a2 Milk Company Limited. Recently, the Company disclosed the retirement of Bessie Lee, its independent non-executive director, and the appointment of Sandra Yu for the post of an independent director.
Ms Yu will also be a member of ATM’s Audit and Risk Management as well as the People and Remuneration committees.
Further, ATM’s Board has announced that its Chair, David Hearn, would be an independent director and that its CEO had full executive control and accountability in the Company.
At the time of writing, on 2 March, ATM, was down by 0.66% at NZ$5.990.
Fonterra Co-operative Group Limited (NZX:FCG)
Fonterra Co-operative Group Limited had provided a global dairy update about its markets a few days ago. Monthly exports were up from New Zealand and Australia for the 12 months to December 2021, while those from the US and the EU were on a decline.
Also, monthly production across all its regions slumped; some of the factors which attributed to this decline included varied weather conditions, labour and supply chain disruptions, herd size contractions, etc.
Further, monthly imports from the Middle East and Africa, Latin America and Asia grew, primarily on account of a higher demand for cheese, whey and fluid milk products, among others.
Moreover, Fonterra has entered into a strategic partnership with the NZX and the European Energy Exchange to take ownership stakes in the Global Dairy Trade. The said partnership is likely to be completed by mid-2022.
At the time of writing, on 2 March, FCG was trading flat at NZ$3.040.
Synlait Milk Limited (NZX:SML)
Focusing on expert farming and state-of-the-art processing, Synlait Milk Limited offers a range of nutritional milk products, which are distributed both domestically as well as internationally.
It will publish its HY22 performance on 1 April.
Further, a briefing will be held after the result announcement.
At the time of writing, on 2 March, SML was declining by 0.61% at NZ$3.280.
Do Read: Synlait (NZX:SML): Why did it strike a deal with Danone?
Bottom Line
Unfavourable weather conditions and rising input costs are likely to affect milk production, not only in New Zealand but also across other regions like the US and the EU, with the Russian attack on Ukraine pushing the prices even higher.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)