Dairy product prices rise 3.4% in second straight gain; SMP increases, WMP falls

Thursday 2nd June 2016

Dairy product prices increased for the second Global Dairy Trade auction in a row, led by butter milk powder and skim milk powder, while whole milk powder declined.

The GDT price index rose 3.4 percent to $2,329, up from US$2,283 and the second-largest gain this year. Some 24,046 tonnes of product was sold, up from 18,113 tonnes at the previous auction two weeks ago.

Skim milk powder rose 12 percent to US$1,867 a tonne and whole milk powder, typically the biggest product on offer by volume, fell 1.7 percent to US$2,205 a tonne. The price of whole milk powder is less than half the level it peaked at in April 2013 of US$5,245 a tonne but had been broadly recovering since mid-February.

The sale overnight is the first since Fonterra Cooperative Group gave its forecast for the farmgate milk payout for 2016/17, raising it to a lower-than-expected $4.25 per kilogram of milk solids from $3.90/kgMS payment for the 2015/16 season and heralding the third straight season where the price paid is below breakeven for most farmers. Weak world prices have prompted both Fonterra and Murray Goulburn to cut their payout forecasts across the Tasman, leading the federal government to offer assistance via loans to farmers.

Butter milk powder rose 14.2 percent to US$1,765 a tonne, having soared 16.2 percent in the last auction , and is now at the highest level since November last year.

The only trading was in contract 2, due in August. Anhydrous milk fat rose 2.8 percent to US$3,444 a tonne and lactose gained 4.7 percent to US$750 a tonne. Butter rose 3.2 percent to US$2,762 a tonne and rennet casein fell 1.6 percent to US$5,035 a tonne. Cheddar rose 7.8 percent to US$2,669 a tonne.

The New Zealand dollar recently traded at 68.17 US cents, up from 67.85 cents in late Wellington trading yesterday.

There were 108 winning bidders out of 161 participating bidders at the 18-round auction. The number of qualified bidders fell to 614 from 623 at the previous auction.

BusinessDesk.co.nz

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