Global dairy prices down again

19 Oct, 2017 01:38 PM
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Prices on the GlobalDairyTrade auction slipped for the second consecutive time this week. Source: GlobalDairyTrade
Further falls will put pressure on Fonterra's New Zealand farmgate forecast payout.
Prices on the GlobalDairyTrade auction slipped for the second consecutive time this week. Source: GlobalDairyTrade

Despite Fonterra putting more whole milk powder into the latest global dairy auction, demand failed to match supply as dairy prices fell 1 per cent to an average US$3204.

Further falls will put pressure on Fonterra's New Zealand farmgate forecast payout, which sits at $NZ6.75 per kilogram of milksolids.

ANZ has lowered its prediction to a range of $NZ6.25-$NZ6.50 as a result of the latest prices.

ANZ rural economist Con Williams said Europe was expected to produce higher milk flows from January on, which would push prices further down.

The result followed last auction's unexpected 2.4 per cent drop, which broke two consecutive increases.

Since May there have been 10 auctions, with prices rising in five and falling in five.

Every product declined except anhydrous milk fat, which lifted 5.2 per cent.

The gloss appears to be fading off butter, which was down by 2.5 per cent to $US5736, and followed a fall of 3.6 per cent two weeks ago.

Whole milk powder (WMP) - a key export product for New Zealand - was down 0.5 per cent to $US3014.

This week Fonterra updated its forecast milk collection for the season, lowering it to 1540 million kilograms of milksolids from an earlier 1548 million kg/MS.

In September, Fonterra New Zealand milk collection was 2 per cent behind September last season because of poor weather, while Fonterra Australia collection increased 23 per cent on September last year.

AgriHQ analyst Susan Kilsby said falling New Zealand milk production should be supporting WMP prices, but buyers seemed to be confident they could source WMP whenever they wanted and were therefore not competing hard for it.

"The WMP contracts due to be shipped before the end of the year were sold at a premium - most likely finding support from Chinese buyers who are looking to secure product to land in China early in January within the lower tariff window," she said.

The European Commission is considering changes to its skim milk powder intervention buy program, which has propped up prices for the past three years.

There is almost 400,000 tonnes in storage.

There were 137 winning bidders and 35,669 tonnes of dairy products sold.

Meanwhile Polish Dairy, the fifth largest producer of milk in the European Union, has announced it will join the global dairy trade platform from November 21, initially offering skim milk powder, whole milk powder, butter and lactose.

"Central Europe has become an increasingly important dairy region. The addition of a seller from Poland is evidence of the emerging strength of that nation's dairy sector," GDT director Eric Hansen said.

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