Global dairy prices fall 1.1%

02 May, 2018 09:23 AM
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The Global Dairy Trade auction index has been relatively stable for the past six months. Source: Global Dairy Trade
At the moment we just have little ripples and we like little ripples.
The Global Dairy Trade auction index has been relatively stable for the past six months. Source: Global Dairy Trade

Dairy prices have dipped 1.1 per cent in the latest GlobalDairyTrade auction on Tuesday night to reach an average price of US$3465 per tonne.

The benchmark whole milk powder prices dropped 1.5 per cent, skim milk powder (SMP) lifted 3.6 per cent, rennet casein was down 10.5 per cent, cheddar prices were up 3.1 per cent and butter remained unchanged.

NZ Federated Farmers dairy chairman Chris Lewis said apart from the 2.7 per cent lift in the last auction, the consistency of and stability of dairy prices since February would have pleased farmers because it allowed them to more confidently forward plan their business.

"At the moment we just have little ripples and we like little ripples," he said,

Dairy price volatility in more recent times that saw prices rise and then crash just as quickly made that more difficult to do, he said.

The movements of the NZ/US exchange rate were having a greater effect on dairy prices at the moment than the slight fall in milk prices.

ASB Bank senior rural economist Nathan Penny said in the bank's latest Rural Economic Note that the fall in the dollar "more than trumps" the fall in milk price.

"Indeed, since the last auction, the NZD/USD has fallen by around 4.6 per cent. The net effect of the two moves sees the overall dairy auction prices circa 3 per cent higher in NZD terms since the last auction."

Mr Penny said there was potential for their milk price forecasts to move higher.

"However, the sharp move lower in the NZD could prove temporary," he said. "We'll wait and see on that front."

Rabobank dairy analyst Emma Higgins said New Zealand product pricing would wane over the coming weeks as the milking season slipped into its seasonal production hiatus and sentiment trailed off as the focus shifted to the Northern Hemisphere.

"In saying that, however, there still remains demand for fresh skim milk powder and a late spring in the Northern Hemisphere delaying production has resulted in tighter fresh inventories," she said.

"As such, we saw positive price support for SMP this morning."

New Zealand product was still priced at a premium over European-sourced SMP.

"And while demand for fresh is strong, old EU SMP stocks are seeing some clearing movement," Higgins said.

The second-to-last GDT auction for the 2017/18 production season coincided with Fonterra releasing its latest Global Dairy Update, which saw the co-operative revise its production forecast for the full season from being down 3 to 2 per cent on last season or 1.313 billion kilograms of milk solids (MS).

North Island milk collection was down 3 per cent for the season from June 1 to March 31 collecting 792m kg/MS. In the month of March, it reached 79 million kg/MS, 6 per cent down on March last season.

Milk production fell 1 per cent in the season to date in the South Island with 521m kg MS collected, but it lifted 1 per cent to 64 million kg MS in March.

The final GDT auction for this production season is on May 15.

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