Demand improving but most dairy product prices extend drop

Wednesday 6th May 2015

Dairy product prices slipped in the latest GlobalDairyTrade auction, with declines in milk powder and anhydrous milk fat prices outweighing a firming of cheese prices, amid sluggish demand from China and Russia, while a weakening euro has made eurozone dairy product prices more competitive.

The GDT average winning price fell 3.5 percent to to US$2,515, down from US$2,620 at the previous auction three weeks ago. It was the lowest level since the December 2 auction of 2014. Some 27,369 tones of product was sold, up from 25,596 tonnes of product three weeks ago.

The AgriHQ Seasonal Farmgate Milk Price for the 2014-15 season decreased by 1 cent per kilogram. Milksolids fell to $4.50/kgMS following the auction. This is in line with Fonterra’s milk price forecast which was recently revised down to that same level.

“The increase in the number of companies buying product on GDT indicates demand is beginning to improve, but this increase in demand is not yet being reflected in the prices,” AgriHQ dairy analyst Susan Kilsby said in a note. “The volume of product on offer was greater than the previous auction as Fonterra is now sellling next season’s product in the later dated contracts.”

Butter milk powder slumped 14.0 percent to US$1,748 a tonne, while rennet casein dropped 11.0 percent to US$6,094 a tonne.

Skim milk powder fell 7.5 percent to US$2,048 a tonne, while anhydrous milk fat dropped 6.3 percent to US$3,505 a tonne.

“It’s a buyers’ market for skim milk powder at present with strong competition between New Zealand and European suppliers who are operating in the Asian and Middle East markets,” Kilsby said.

“A better than expected end to the 2014-15 milk production season means New Zealand dairy companies still have some current season product to sell, while European milk production is heading towards its seasonal peak,” she added.

Whole milk powder fell 1.8 percent to US$2,386 a tonne. Over the past two months, whole milk powder average prices on the GDT platform have fallen by a quarter, and investors are betting on more weakness.

Butter slipped 0.8 percent to US$3,005 a tonne.

Cheddar, however, jumped 9.1 percent to US$3,012 a tonne.

Sweet whey powder was not offered at the latest event, while lactose was either not offered, not sold, or sold at the starting price.

The New Zealand dollar last traded 0.4 percent higher at 75.64 US cents at about 2:38pm in New York, compared with 75.37 US cents at 5pm in Wellington the previous day.

There were 117 winning bidders out of 144 participating bidders at the 11 round auction. The number of qualified bidders rose to 685, up from 673 at the last auction.

BusinessDesk.co.nz

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