Milk powder prices extend slump in Fonterra online auction

Wednesday 3rd June 2009

The price of milk powder slumped 12% in Fonterra Cooperative Group’s latest online auction, stoking concern protectionist moves by Europe and the US will undermine any recovery in dairy prices.

The average price of milk powder sank to US$1,886 per metric ton, according to results posted on the GlobalDairyTrade website, down from US$2,144 last month. In New Zealand dollar terms, prices tumbled 19%.

“The subsidies in Europe and the US place some downside pressure on our prices – it’s definitely a worry,” said Philip Borkin, economist at ANZ National Bank. “The fall was quite a surprise” as there have been some signs that dairy prices had found a base, he said.

Fonterra, the world’s biggest dairy exporter, announced an opening forecast payment for the 2010 season of $4.55 per kilogram of milk solids, a 13% decline from this season’s $5.20 per kg. The company blamed the soaring New Zealand dollar for the lower estimate, with the kiwi having jumped by about one third its sub-50 US cent low in March.

The currency was recently at 65.57 US cents.

Last month Fonterra said there were “some encouraging signs of more stability” in global dairy prices, but since then the US Department of Agriculture has reintroduced subsidies for more than 92,000 metric tons of dairy products out of the US.

Dairy products account for some 20% of New Zealand’s annual $43.2 billion export market. Milk and cheese exports rose 4.8% to $8.9 billion in the 12 months to April 30, according to government statistics.

Businesswire.co.nz

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