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NZ commodity prices dip in April as skim milk powder, cheese drag down dairy

Thursday 4th May 2017

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New Zealand commodity prices slipped 0.2 percent in April as an excess supply of skim milk powder (SMP) and cheaper cheese weighed on the broader dairy sector. 

The ANZ Commodity Price index fell to 282.9 from 283.5 in March, led lower by a 2.5 percent fall in dairy prices. Skim milk powder prices dropped 12 percent in the month and cheese prices dropped 6.8 percent, which weighed on the broader index, ANZ's New Zealand agri-economist Con Williams said in his report. 

"The pressure point in global dairy markets remains SMP with an excess of North Hemisphere inventory and seasonal supply lifting," he said. "Encouragingly, however, GDT (global auction) whole milk and milk fat product prices have recently increased, due to low seasonal supply from New Zealand and strong demand from Middle East/North Africa and China, suggesting the overall dairy picture is more nuanced." 

Dairy prices have recovered from their slump early last year, which put many farming operations underwater and prompted banks to watch their balance sheets closely. Since then, global dairy prices have recovered, with the most recent GlobalDairyTrade auction showing an unexpected increase in whole milk powder prices, and lenders have become calmer about the sector's outlook. 

Today's ANZ survey shows dairy prices are still 46 percent higher than they were a year earlier and the broader index was up 24 percent from April 2016. The New Zealand dollar index, which adjusts for currency movements, rose 0.5 percent to 210.5 in the month and was up 20 percent from a year earlier, taking it to its highest level since 2013/14 when whole milk powder prices were at a record. 

Meat and fibre prices rose 1.9 percent in the month, with lamb prices up 3.6 percent as tight Australasian supply spurred greater competition, while beef prices gained 2.2 percent with supply limited in the US. Wool prices fell 5 percent. 

Aluminium prices increased 0.8 percent as inventories on the London Metal Exchange slumped, while wood pulp prices gained 2.7 percent on strong Chinese demand and log prices increased a more modest 0.7 percent. 

Horticulture prices rose 0.6 percent with apple prices up 2.1 percent as the European season started.



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