Dairy prices fall 0.6 per cent

04 Apr, 2018 09:24 AM
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This is the fourth consecutive decrease to the GDT index, following a bright start to the year...

Dairy prices fell by 0.6 per cent at the latest Global Dairy Trade (GDT) auction on Tuesday night to reach an average of US$3477 (NZ$4790) per tonne.

Futures markets had indicated average prices across all products would remain flat.

This is the fourth consecutive decrease to the GDT index, following a bright start to the year with three increases in January and early February.

However, the price of New Zealand's key product, whole milk powder (WMP) rose 1.6 per cent.

Analysts are closely watching the auction to gauge the effect the trade spat between the United States and China might have on the New Zealand dollar.

Meanwhile Fonterra has reported a 4 per cent drop in milk collection in February, and a 2 per cent fall from the beginning of the season in June to the end of February.

By contrast Fonterra Australia collected 30 per cent more in February compared to the same month last year.

With only a few more weeks to go in the season, Fonterra expects total New Zealand production will come in at 3 per cent less than last year.

NZ Federated Farmers dairy chairman Chris Lewis said farmers in some regions had been "doing it tough".

He had visited Taranaki and Edgecumbe recently, the former hit by rain and drought, the latter by floods.

"But at least the milk price has been relatively rock steady over the last year," he said.

There was a "little bit of optimism" around, as reflected in last week's Rabobank confidence survey, although problems such as Mycoplasma bovis had taken the gloss off.

NZ ASB rural economist Nathan Penny said the result affirmed the bank's 2017-18 milk price forecast for NZ farmers of $NZ6.55 per kilogram of milksolids.

"From here, we expect prices to remain at or around current levels until the end of the season," he said.

"While New Zealand production is improving, the recovery from weak production earlier in the season is progressing only gradually.

"With global demand also firm, we expect the global dairy market will remain largely balanced and for prices to track sideways as a result."

Two weeks ago Fonterra lifted its NZ farmgate forecast price to $NZ6.55kg/MS from $NZ6.40, but with a revised forecast earnings per share range of NZ25-35c.

The big movers and shakers on the day saw anhydrous milk fat drop a significant 7.0 per cent; while rennet casein shot up by 12.1 per cent.

Butter also saw a boost of 4.1 per cent at the event, reflecting continued demand. Cheddar was up 2.2 per cent, lactose lifted 1.1 per cent but skim milk powder fell 1.8 per cent.

There were 123 winning bidders, and 17,222 tonnes of product was sold.

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