Dairy product prices slide amid abundant supply

Wednesday 8th March 2017

Dairy product prices declined at the Global Dairy Trade auction, falling for a second straight auction, as supply is larger than previously anticipated.

The GDT price index slid 6.3 percent from the previous auction two weeks ago to US$3,512. Some 22,328 tonnes of product was sold, up from 20,479 at the previous auction.

Whole milk powder sank 12.4 percent to US$2,782 a tonne.

Improved milk intakes in recent months mean Fonterra has more product available to sell than previously anticipated, AgriHQ dairy analyst Susan Kilsby said in a note.

"To see prices falling again before the market has fully recovered will be a disappointment to farmers,” Kilsby said. “While one poor result doesn't have a huge impact on the milk price, it will be difficult for prices to recover quickly while there is surplus product available.”

The auction’s result “shows just how tightly balanced the market is—there just isn't the depth of demand in the market to absorb any extra product at the moment,” Kilsby added.

At the latest GDT auction, skim milk powder plunged 15.5 percent to US$2,118 a tonne, while rennet casein dropped 6.6 percent to US$5,678 a tonne.

Lactose declined 4.3 percent to US$924 a tonne, while cheddar fell 4.2 percent to US$3,435 a tonne, and anhydrous milk fat slipped 0.8 percent to US$5,653 a tonne.

Meanwhile, butter milk powder jumped 8.4 percent to US$1,846 a tonne, while butter gained 1.2 percent to US$4,653 a tonne.

The New Zealand dollar last traded at 69.83 US cents at 12.55pm in New York, compared with 69.94 US cents at 5pm in Wellington the previous day.

There were 113 winning bidders out of 134 participating at the 10-round auction. The number of qualified bidders was 530, the same as at the previous auction.

BusinessDesk.co.nz

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