Global prices slip again

21 Mar, 2018 01:03 PM
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There were 125 winning bidders with a total of 18,635 tonnes of product sold.
This is the third consecutive fall following three positive auctions earlier in the year.
There were 125 winning bidders with a total of 18,635 tonnes of product sold.

Dairy prices fell at the Global Dairy Trade (GDT) auction on Tuesday evening by an average 1.2 per cent across all products to reach US$3632 a tonne.

The price for butter was unchanged, while whole milk powder (WMP) was up very slightly, 0.1 per cent.

The futures market had indicated another drop after prices nudged down 0.6 per cent at the last auction two weeks ago.

This is the third consecutive fall following three positive auctions earlier in the year.

Lower New Zealand milk production helped support WMP prices. Fonterra announced a week ago its milk collection was 2 per cent lower for the first seven months of the season, compared to the year before.

February production was down 3.9 per cent as up and down weather continued to have an influence.

Skim milk powder (SMP) prices plunged by 8.6 per cent.

Following the last auction, analysts expressed surprise over the high prices achieved for skim milk powder ultra high temperature (SMP UHT).

Huge amounts of the product have been stockpiled in Europe.

United States analyst HighGround Dairy had described the difference in price between the UHT grade of SMP and the medium heat grade of SMP as "an almost unfathomable spread".

The former fetched US$3220 per tonne at the March 6 auction, while the latter was only US$1905, a premium of US$1315.

"Reasons for that result are either multiple buyers desperate to obtain that specific Fonterra spec or a technical glitch," HighGround said.

Director of Global Dairy Trade Eric Hansen said the auction platform had reviewed why SMP had sold at such a premium.

"The principal cause of the difference in winning prices at this auction was persistently strong demand by multiple bidders for UHT against a consistent supply," he said.

"GDT has also received feedback that contract execution will progress as normal between the successful buyers and the seller."

AgriHQ analyst Amy Castleton said butter prices were stronger for product to ship in July and August, indicating some longer-term demand.

"It has been difficult for buyers to find butter on the global market to fill short-term needs. While plenty of milk has been coming out of Europe, it has not had enough butter to meet near-term demand. The result suggests buyers have now filled their immediate butter needs."

Cheddar prices fell 3.9 per cent based on the fact there is plenty of cheese available from both Europe and the United States.

There were 125 winning bidders with a total of 18,635 tonnes of product sold.

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