Dairy product prices increase for first time in six months

Wednesday 19th August 2015

Dairy product prices jumped in the latest GlobalDairyTrade auction, rising for the first time in nearly six months on reduced volume of whole milk powder on offer.

The GDT average winning prices climbed 14.8 percent to US$1,974, up from US$1,815 at the previous auction two weeks ago. It was the first increase since the March 3 auction. Some 36,904 tonnes of product was sold, down from 46,527 tonnes of product two weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price has increased to $3.85 per kilogram milksolids, in line with Fonterra’s current 2015-16 milk price forecast.

“Fonterra’s milk price forecast is now looking achievable,” AgriHQ dairy analyst Susan Kilsby said in a note. “Dairy commodity prices need to continue to track upwards in line with NZX Dairy Derivatives market projections in order to reach the current forecast price.”

The NZX Dairy Derivatives market indicates whole milk powder prices will increase by another 45 percent by the end of the season, Kilsby noted.

Ahead of the auction Fonterra reduced the volume of whole milk powder on offer by 33.5 percent compared with its earlier forecast.

“This hefty reduction in the volume available on GDT was the trigger required to turn market sentiment,” Kilsby said.

To be sure, “it may not be plain sailing from here on” warned Kilsby. “Global dairy markets remain oversupplied. Until global milk supply slows the market will remain very volatile.”

Anhydrous milk fat soared 26.6 percent to US$2,724 a tonne, while whole milk powder jumped 19.1 percent to US$1,856 a tonne.

Butter climbed 10.8 percent to US$2,541 a tonne, while skim milk powder rallied 8.5 percent to US$1,521 a tonne.

Cheddar increased 4.4 percent to US$2,778, while rennet casein rose 3.0 percent to US$5,441 a tonne.

Butter milk powder dropped 13.8 percent to US$1,400 a tonne, and lactose shed 7.8 percent to US$502 a tonne.

The New Zealand dollar last traded at 65.88 US cents at about 2.40pm in New York, compared with 65.84 US cents at 5pm in Wellington the previous day.

There were 136 winning bidders out of 177 participating bidders at the 17-round auction. The number of qualified bidders fell to 621, down from 637 at the last auction.

BusinessDesk.co.nz

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