Dairy product prices slide more than expected

Thursday 16th July 2015

Dairy product prices sank in the latest GlobalDairyTrade auction, paced by cheddar and whole milk powder, reflecting a sombre outlook.

The GDT average winning prices sank 10.7 percent to US$2,082, down from US$2,276 at the previous auction two weeks ago. It was the lowest level since July 2009. Some 31,691 tonnes of product was sold, down from 33,200 tonnes of product two weeks ago.

AgriHQ dairy analyst Susan Kilsby called the auction “a disastrous result,” adding that “the NZX Futures market anticipated whole milk powder prices would fall overnight. However the market underestimated the size of the fall.”

“Farmers now face two consecutive seasons of extremely low milk prices,” Kilsby said in a note. “The majority of farmers can’t break even at such a low milk price.”

The AgriHQ 2015-16 Farmgate Milk Price decreased to $4.22 per kilogram milk solids, down 83 cents from a fortnight ago and $1.27 lower than a month ago. It compares with Fonterra’s 2015-16 milk price forecast of $5.25/kgMS.

“Farm debt levels will rise,” according to Kilsby. “Rural communities will suffer as farmers reduce spending to the bare essentials.”

Cheddar plunged 13.9 percent to US$2,613, while whole milk powder sank 13.1 percent to US$1,848 a tonne. Anhydrous milk fat dropped 10.6 percent to US$2,621 a tonne, while skim milk powder shed 10.1 percent to US$1,702 a tonne.

Butter slid 9.5 percent to US$2,460 a tonne, while rennet casein fell 8.0 percent to US$5,430 a tonne. Butter milk powder declined 4.4 percent to US$1,794 a tonne.

Bucking the trend, lactose rose 1.9 percent to US$549 a tonne.

The New Zealand dollar last traded at 66.04 US cents at about 2:20pm in New York, compared with 67.00 US cents at 5pm in Wellington the previous day. The currency was trading above 88 US cents a year ago.

There were 130 winning bidders out of 135 participating bidders at the 10 round auction. The number of qualified bidders dropped to 628, down from 652 at the last auction.

BusinessDesk.co.nz

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