While the average price fall of 4.3 per cent was disappointing, the time of year of the auction suggested its results were not a reliable indicator of how prices would continue, said director dairy research New Zealand and Asia, Hayley Moynihan.
«The global market looks more towards European production [at this time] and volumes are low. We are not seeing new season’s volumes being put on GDT till the old season’s volume is being sold. For that reason we tend to see more varied results around this time of the year,» she said.
«And certainly in previous years it hasn’t always proved a good indicator of how the rest of the season pans out.»
Rabobank still believed global dairy markets would start to tighten at the end of this year and more strongly into 2016.
«Demand and supply should come back into proper balance and we will see upward price pressure come into the market. We have always considered that a late 2015-early 2016 prospect and that hasn’t changed.»
Moynihan said the only surprise of the latest auction, in which the average price fell for the sixth sale running, was that butter and anhydrous milk fat (AMF) prices fell significantly. Butter fell 10 per cent to US$2619 per tonne, while AMF posted a 7.4 per cent drop to US$3112.
Wholemilk powder, New Zealand’s main export, was down 3.1 per cent at US$2309 and skim milk powder fell 1.3 per cent to US$1982.
Moynihan said butter and AMF prices had held up higher than other dairy products in the global price downturn so had further to fall.
«But we are seeing some regional disparities in the market at the moment. Dairy fat prices are very high in the US for example. A lot of that is around US demand recovering. So we have a differential between the world market and the US market as well, which has just widened further.»
Moynihan said butter and fat products were a thin global market because most products were consumed within the domestic market they were made in.
«The global market looks more towards European production [at this time] and volumes are low. We are not seeing new season’s volumes being put on GDT till the old season’s volume is being sold. For that reason we tend to see more varied results around this time of the year,» she said.
«And certainly in previous years it hasn’t always proved a good indicator of how the rest of the season pans out.»
Rabobank still believed global dairy markets would start to tighten at the end of this year and more strongly into 2016.
«Demand and supply should come back into proper balance and we will see upward price pressure come into the market. We have always considered that a late 2015-early 2016 prospect and that hasn’t changed.»
Moynihan said the only surprise of the latest auction, in which the average price fell for the sixth sale running, was that butter and anhydrous milk fat (AMF) prices fell significantly. Butter fell 10 per cent to US$2619 per tonne, while AMF posted a 7.4 per cent drop to US$3112.
Wholemilk powder, New Zealand’s main export, was down 3.1 per cent at US$2309 and skim milk powder fell 1.3 per cent to US$1982.
Moynihan said butter and AMF prices had held up higher than other dairy products in the global price downturn so had further to fall.
«But we are seeing some regional disparities in the market at the moment. Dairy fat prices are very high in the US for example. A lot of that is around US demand recovering. So we have a differential between the world market and the US market as well, which has just widened further.»
Moynihan said butter and fat products were a thin global market because most products were consumed within the domestic market they were made in.
«In recent weeks skim milk powder and butter provided higher returns. Now butter has come back we have a more even returns stream rather than wholemilk powder being weaker.»
Rabobank will publish its 12-month commodity price forecast in the week of June 15, which Moynihan said would provide a more detailed picture and timing of an expected commodity price recovery in the year to June 2016.
Meanwhile NZ Waikato Federated Farmers president Chris Lewis, a dairy farmer, said the mood of farmers after the latest GDT price fall was one of frustration.
They had been hoping to see a levelling off of prices after the string of falls.
Lewis said farmers should have been warned earlier by dairy companies that a low payout period was coming.
While even the most senior market watchers at Fonterra and Open Country Dairy had not seen the world price slump coming last year, there were signs from October through the last quarter of the year that the payout was going to be lower, he said.
«There were strong indications more than six months ago. It’s not my job in the Feds to communicate this. Others should have been warning milk suppliers, and earlier.»
Rabobank will publish its 12-month commodity price forecast in the week of June 15, which Moynihan said would provide a more detailed picture and timing of an expected commodity price recovery in the year to June 2016.
Meanwhile NZ Waikato Federated Farmers president Chris Lewis, a dairy farmer, said the mood of farmers after the latest GDT price fall was one of frustration.
They had been hoping to see a levelling off of prices after the string of falls.
Lewis said farmers should have been warned earlier by dairy companies that a low payout period was coming.
While even the most senior market watchers at Fonterra and Open Country Dairy had not seen the world price slump coming last year, there were signs from October through the last quarter of the year that the payout was going to be lower, he said.
«There were strong indications more than six months ago. It’s not my job in the Feds to communicate this. Others should have been warning milk suppliers, and earlier.»
Source: FarmWeekly
