Dairy product prices increase on optimism for outlook

Wednesday 7th October 2015

Dairy product prices climbed in the latest GlobalDairyTrade auction, increasing for a fourth consecutive time after nearly six months of declines.

The GDT average winning prices rallied 9.9 percent to US$2,834, the highest level since March, up from US$2,568 at the previous auction three weeks ago. Some 35,243 tonnes of product was sold, down from 36,050 tonnes of product three weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price increased 74 cents to $5.39 per kilogram milksolids, compared with Fonterra’s 2015-16 milk price forecast of $4.60/kgMS.

“The lift … is primarily driven by market expectations of further gains in dairy commodity prices through the rest of the season,” AgriHQ dairy analyst Susan Kilsby said in a note.

The NZX Dairy Derivatives market indicates whole milk powder prices will reach US$3,000 a tonne before the end of 2015 and remain above this level for the remainder of the season.

“This is good news for dairy farmers as US$3,000 a tonne is about the price required for most farms to break even,” Kilsby said in a note.

Butter milk powder jumped 13.8 percent to US$1,945 a tonne, while skim milk powder gained 13.4 percent to US$2,267 a tonne.

Whole milk powder increased 12.9 percent to US$2,824 a tonne, while anhydrous milk fat climbed 9.9 percent to US$3,763 a tonne.

Lactose added 5.9 percent to US$524 a tonne, while rennet casein advanced 4.0 percent to US$6,048 a tonne, and cheddar increased 0.5 percent to US$3,234 a tonne.

Butter slipped 2.3 percent to US$3,037 a tonne.

“The outlook for butter is more subdued,” Kilsby noted. “Anhydrous milk fat was previously undervalued when considered on a milk-fat content basis but is now priced similar to butter.”

The New Zealand dollar last traded at 65.37 US cents at about 1.32pm in New York, compared with 64.90 US cents at 5pm in Wellington the previous day.

There were 119 winning bidders out of 180 participating bidders at the 17-round auction. The number of qualified bidders slipped to 635, down from 639 at the last auction.

BusinessDesk.co.nz

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