Global dairy prices slip 0.4%

16 Aug, 2017 09:52 AM
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Steady as she goes: Global dairy prices have shown little movement in the past four months.
The drop was unexpected, as the futures market and analysts had been predicting a small nudge up.
Steady as she goes: Global dairy prices have shown little movement in the past four months.

For the fourth time in the last five auctions, global dairy prices have fallen slightly, including a small decline in New Zealand's key export product whole milk powder (WMP).

Following a 1.6 per cent fall in the previous Global Dairy Trade auction a fortnight ago, the overall index was down 0.4 per cent at US$3339 (NZ$4613).

The drop was unexpected, as the milk futures market and analysts had been predicting a small nudge upwards.

The price for WMP fell 0.6 per cent, while the price for butter, which has enjoyed a 35 per cent increase this year up until the last auction, declined 1.3 per cent.

NZ Federated Farmers dairy group chairman Chris Lewis said continued wet weather across the country might have an impact on the auction in a few weeks time, as production dips.

Reacting to the latest Rabobank dairy report looking ahead to 2022, Mr Lewis said he agreed with its general tenor which predicted the last 20 years of milk growth would slow to a trickle.

"The new normal is that farmers aren't going hell for leather, they are trying to produce milk sustainably in all sorts of ways - environmentally, but also from a business point of view," he said.

"We were a bit like possums in the headlights five or 10 years ago when there was so much expansion, but we've moved on and it's all about being a viable business."

Even though in theory there might be more competition as processors chased the milk they needed for the new plants they have built recently, in practice it was unusual for farmers to shift processors.

"It's a bit like changing your bank, it's not something you do on a whim, you consult widely before you move," he said.

As far as he was aware, in his area of Waikato there was little spare capacity at Open Country Dairy, Miraka was full and Tatua closed off to new entrants.

Processors might have problems getting the optimum use out of their plant, but collecting sufficient milk was also weather dependent. Last season, for example, a cold snap in the Waikato drastically reduced production.

AgriHQ said Fonterra had shifted around offer volumes of milkfats for the auction. The dairy giant would offer slightly lower volumes of milkfats over coming months, while it directed milk into added value products and WMP over peak milk producing months.

Despite the overall price index fall, some of the categories on offer actually posted increases. Rennet casein prices improved by 2.9 per cent, cheddar posted a 1.4 per cent rise and skimmed milk powder was up marginally by 0.3 per cent.

There were more winning bidders at the auction – 140 compared to 129 two weeks ago. The extra bidders were largely from South and Central America and Africa. There was 32,260 tonnes of product sold.

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