Dairy product prices slide on increasing overseas supply

Wednesday 18th November 2015

Dairy product prices fell to a more than two-month low in the latest GlobalDairyTrade auction, weakening for a third consecutive auction, amid an increase in international supply and a subdued outlook.

The GDT average winning prices dropped 7.9 percent to US$2,345, the lowest since the September 1 auction and down from US$2,569 at the previous auction two weeks ago. Some 30,044 tonnes of product was sold, down from 33,997 tonnes of product two weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price decreased 44 cents to $4.27 per kilogram milksolids. This is lower than Fonterra’s current 2015-16 milk price forecast of $4.60/kgMS.

“At present buyers are generally well stocked and have ample supply options for dairy commodities,” AgriHQ dairy analyst Susan Kilsby said in a note. “Therefore we currently see very little urgency from buyers.”

“The drop in milk output from New Zealand in recent months has been matched threefold by the increase in production from Europe,” Kilsby noted. “Until global milk supplies drop further, prices are expected to remain soft.”

Whole milk powder sank 11.0 percent to US$2,148 a tonne, while skim milk powder dropped 8.1 percent to US$1,851 a tonne.

The outlook for whole milk powder has deteriorated in the past two weeks, Kilsby said. The NZX Dairy Futures market indicates that whole milk powder prices will reach US$2,400 a tonne by July 2016, having fallen US$400 a tonne in the past fortnight.

Anhydrous milk fat slid 5.9 percent to US$3,430 a tonne, while cheddar retreated 5.0 percent to US$2,874 a tonne.

Rennet casein fell 4.4 percent to US$5,250 a tonne, while lactose declined 2.0 percent to US$503 a tonne, and butter milk powder slipped 1.0 percent to US$1,825 a tonne.

In a single bright spot, butter gained 5.6 percent to US$2,709 a tonne.

The New Zealand dollar last traded at 64.62 US cents at about 11.25am in New York, compared with 64.93 US cents at 5pm in Wellington the previous day.

There were 117 winning bidders out of 141 participating bidders at the 13-round auction. The number of qualified bidders dropped to 609, down from 643 at the last auction.

BusinessDesk.co.nz

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