ATM, SML, FCG: Focus on dairy stocks as GDT price index falls

The Global Dairy Trade price index plunged 4.1% to 1,287 in the latest auction held overnight. It is the second straight decline after a 1.3% drop in the previous auction. Dairy prices continued the trend of a decline in global auctions as demand for dairy is easing.

The average price achieved stood at US$4360 with the product sold equaling 23,461MT. The butter price index witnessed the highest drop of 9.1% followed by a fall of 7.6% in the buttermilk powder index, a 5.2% dip in the skim milk powder index and 3.3% in the whole milk powder index.

Source: © Piliphoto | Megapixl.com

NZX senior analyst Amy Castleton stated that buyers were there but were unwilling to pay a higher price for the product. She also added that July was a quiet month of the year but still all the volume on offer was sold. Moreover, high interest rates and high inflation also reduced demand for dairy products.

Here’s a peek into 3 dairy stocks listed on the NZX.

Synlait Milk Limited (NZX:SML; ASX:SM1)

On Wednesday, Synlait increased its forecast milk price to $9.5/kgMS from $9/kgMS, up 50 cents for the 2022/2023 season. The forecast milk price stayed at $9.3/kgMS for the 2021/2022 season.

Synlait chief executive Grant Watson stated that the forecasted lift in milk price showed a better outlook for dairy commodity prices for the 2022/23 season after a recovery in pricing and strength in the USD.

On 6 July, at the time of writing, ATM was trading at $3.24, up 0.62%.

The a2 Milk Company Limited (NZX:ATM; ASX:A2M)

The a2 Milk witnessed a challenging FY21, facing material disruptions due to the COVID-19 pandemic.

ATM plans to rebuild ATM into a sustainable growth company. It has already made some progress on various strategic initiatives like investing in people leadership, capturing 100% potential in the China IMF, transforming the supply chain, etc.

Overall, the company expects to deliver growth in FY22. It anticipates making higher FY22 China label IMF sales and expects capital expenditure to be nearly $15 million-$18 million in the second half of 2022.

On 6 July, at the time of writing, ATM was trading at $5.09, up 2.21%.

Fonterra Co-operative Group Limited (NZX:FCG)

Fonterra released its global dairy update on 30 June. The update showed that NZ milk production fell 6.5% on a litre basis in May compared to the same period a year ago. Moreover, monthly declines were seen across all other regions.

Fonterra’s milk collections for NZ also fell 4% to 1,478 million kgMS in May compared to previous season. It has set its forecast Farmgate Milk Price range between $8.75‑$10.25 per kgMS for the 2022/23 season.

On 6 July, at the time of writing, FCG was trading flat at $2.87.

Bottom Line

Global dairy prices play a key role in setting prices by dairy processors that are paid to farmers.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)