Dairy product prices drop on global supply worry

Wednesday 4th November 2015

Dairy product prices fell in the latest GlobalDairyTrade auction, a second straight decline, as ample worldwide supply subdued the outlook.

The GDT average winning prices dropped 7.4 percent to US$2,569, down from US$2,735 at the previous auction two weeks ago. Some 33,997 tonnes of product was sold, down from 34,519 tonnes of product two weeks ago.

“There is ample supply of dairy product available in the global market and buyers generally have plenty of stock on hand so there is little urgency for them to secure additional stock,” AgriHQ dairy analyst Susan Kilsby said in a note.

“The reduction in milk being produced in New Zealand is being offset by European dairy farmers producing more milk. Until global milk supplies drop further, prices are likely to remain subdued,” Kilsby said.

The AgriHQ 2015-16 Farmgate Milk Price fell 56 cents to $4.71 per kilogram milksolids, which is comparable with Fonterra’s current 2015-16 milk price forecast of $4.60/kgMS.

“The fall in GDT prices was larger than anticipated,” according to Kilsby. “The current outlook for the dairy markets means it is now unlikely Fonterra will be able to lift its farmgate milk price from its current forecast.”

Rennet casein sank 11.2 percent to US$5,469 a tonne, while butter milk powder dropped 9.4 percent to US$1,844 a tonne. Whole milk powder retreated 8.0 percent to US$2,453 a tonne while skim milk powder also fell 8.0 percent, to US$2,018 a tonne.

Anhydrous milk fat declined 5.7 percent to US$3,647 a tonne, butter decreased 5.6 percent to US$2,574 a tonne, and cheddar gave up 4.6 percent to US$2,987 a tonne.

Lactose was not offered, not sold, or sold at its starting price.

The New Zealand dollar last traded at 66.58 US cents at about 10.05am in New York, compared with 67.44 US cents at 5pm in Wellington the previous day.

There were 132 winning bidders out of 151 participating bidders at the 10-round auction. The number of qualified bidders rose to 643, up from 639 at the last auction.

BusinessDesk.co.nz

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