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Dairy product prices drop amid bearish outlook

Wednesday 3rd February 2016

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Dairy product prices slumped in the latest GlobalDairyTrade auction, sliding for the third time in 2016, amid concern about the outlook with supplies outweighing demand.

The GDT average winning price sank 7.4 percent to US$2,276, down from US$2,405 at the previous auction two weeks ago and the lowest level since the September 1, 2015 auction. Some 24,474 tonnes of product was sold, up from 21,930 tonnes of product at the previous auction two weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price fell 11 cents to $4.32 per kilogram milksolids. Last week Fonterra reduced its 2015-16 milk price forecast to $4.15/kgMS.

“Dairy commodity markets remain very bearish as the global milk supply exceeds demand for dairy products,” AgriHQ dairy analyst Susan Kilsby said in a note. “European milk production continues to expand, particularly in Ireland, the Netherlands and Germany. It is unlikely we will see a recovery in the markets until late 2016.”

While the NZX Dairy Futures market had anticipated a reduction in both whole milk powder and skim milk powder prices, the GDT results were even weaker than the market had expected, Kilsby noted.

Whole milk powder slumped 10.4 percent to US$1,952 a tonne, while butter dropped 8.3 percent to US$2,905 a tonne. Butter milk powder shed 6.7 percent to US$1,513 a tonne, while anhydrous milk fat declined 6.6 percent to US$3,486 a tonne.

Cheddar fell 4.2 percent to US$2,807 a tonne, and rennet casein slid 3.7 percent to US$4,362 a tonne. Lactose retreated 2.6 percent to US$577 a tonne, and skim milk powder fell 2.2 percent to US$1,792 a tonne.

The New Zealand dollar last traded at 64.97 US cents at about 11.25am in New York, compared with 65.48 US cents at 5pm in Wellington the previous day.

There were 124 winning bidders out of 144 participating bidders at the 11-round auction. The number of qualified bidders was 619, up from 616 at the previous auction.

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