Butter lifted by 3.4 per cent to $US6004/tonne at the auction last week.
However, Dairy Australia analyst John Droppert said there was not “a great deal of direction” in the market.
He said this was reflected in last week’s GDT auction where average prices increased 0.2 per cent to $US3387 a tonne.
Mr Droppert said the EU had started accepting a few tenders for the SMP intervention and this injected a level of “uncertainty” in the market. The GDT SMP auction dropped 3.2 per cent to $US2024/tonne.
“At the same time, Chinese milk production doesn’t appear to be growing,” Mr Droppert said.
“There are new numbers around suggesting production is dropping. The Chinese milk production outlook is a bit shaky.”
Butter prices have continued to “defy gravity”, according to Mr Droppert, as the spread between protein and fat products widen.
Meanwhile, Bega Cheese adviser David Williams said it was likely the $37.5 million share purchase plan for smaller shareholders would be oversubscribed, but still encouraged dairy farmers to take up the opportunity.
Bega Cheese announced a $160 million capital raising plan last month which included the $37.5 million share purchase plan for its smaller shareholders. Those eligible have the right to purchase up to $15,000 of Bega shares at $5.25 a share.
The capital raising ends next Monday, but Mr Williams said this week “the way it was going” it could raise $50-$60 million.
He said the oversubscription would give Bega Cheese the option to take the extra funds or scale the share uptake back on a pro-rata basis.
He said the course of action wasn’t decided yet, but encouraged dairy farmers to take up the opportunity to make a quick financial gain.
“Based on the closing share price of $6.89 on 21 July 2017, shareholders taking up their full $15,000 entitlement would buy shares currently valued at $19,686, a profit of $4686,” he said.
“Theoretically speaking, a farmer could pay $15,000 today and sell shortly thereafter and make a gain of $4600.
“Bega Cheese shareholders look set to make a quick 30 per cent profit on new shares acquired in the capital raising.”
Source: The Weekly Times