Dairy product prices jump as global milk output eases

Wednesday 3rd August 2016

Dairy product prices rose more than expected at the Global Dairy Trade auction amid signs of a slowdown in worldwide output.

“Dairy commodity markets are waking up to the fact that milk production is slowing across the globe,” AgriHQ dairy analyst Susan Kilsby said in a note. “The majority of the extra milk produced in recent years has come from Europe—but output there is now being stemmed by low returns.”

“We are still seeing growth in the US market but that is largely being taken care of by their domestic market,” Kilsby said.

While the NZX Dairy Derivatives market had anticipated a significant increase in prices at the GDT event, results were even stronger than expected, Kilsby noted.

The GDT price index jumped 6.6 percent to US$2,436, up from US$2,336 at the previous auction two weeks ago. Some 34,928 tonnes of product was sold, up from 31,348 tonnes at the previous auction two weeks ago.

Whole milk powder rallied 9.9 percent to US$2,265 a tonne.

”It is excellent to see such a strong lift in dairy commodity prices this early in the season,” Kilsby said. “New Zealand has a large volume of dairy product to trade in the coming months so it is important that these products achieve higher prices if returns to farmers are to lift.”

The AgriHQ Snapshot milk price climbed 22 cents to $3.93 per kilogram milksolids, as the strength of the commodity markets outweighed the stronger New Zealand dollar. The AgriHQ 2016-17 milk price rose to $4.63/kgMS.

At the GDT auction, rennet casein soared 16.3 percent to US$6,161 a tonne, while butter milk powder advanced 7.7 percent to US$1,661 a tonne.

Butter gained 6.6 percent to US$2,871 a tonne, while anhydrous milk fat rose 4.7 percent to US$3,797 a tonne.

Lactose added 3.7 percent to US$741 a tonne, while skim milk powder increased 2.1 percent to US$1,965 a tonne.

However, cheddar fell 0.8 percent to US$2,889 a tonne.

The New Zealand dollar last traded at 72.36 US cents at about 12.33pm in New York, compared with 71.72 US cents at 5pm in Wellington the previous day.

There were 138 winning bidders out of 180 participating bidders at the 12-round auction. The number of qualified bidders rose to 605, up from 603 at the previous auction.

BusinessDesk.co.nz

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