Global dairy prices slide, but saved by the NZ dollar

The impact of the slide in dairy prices at the latest global dairy auction could have been worse if the value of the New Zealand dollar was higher, Federated Farmers says. By: GERARD HUTCHING Source: Stuff Link: https://www.stuff.co.nz/business/farming/98648556/global-dairy-prices-slide-35-per-cent
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Dairy prices fell on the latest global dairy auction overnight by 3.5 per cent to an average price of US$3105 (NZ$4501).
The index’s decline to a seven-month low follows two consecutive falls, and predictions that prices might be under pressure with New Zealand milk production running flat compared to last year.
This is the largest fall in price since January, when the first GDT auction of the year dropped by 3.9 per cent.
Federated Farmers dairy group chairman Chris Lewis said three months ago the New Zealand dollar was 73.5c to the US, but had since fallen to below 69c, softening the blow of recent falls.
«While this latest drop is very disappointing, it’s not as large as it could have been if our dollar was higher.»
«It won’t be a cause for panic, but it is cause for concern.»
The ASB agreed, saying the lower NZD was providing some offset to the softening in prices. It expected weak New Zealand production to translate into higher prices by the end of the year.
Lewis predicted recent auction results would make it more difficult for Fonterra to maintain its farmgate forecast of $6.75 per kilogram of milksolids for the season.
Farmers would be more cautious over buying equipment and would replace it only out of necessity. After four or five years it would be starting to be «pretty run down».
After record highs earlier in the year, butter has been on the slide in Europe – prices down 14 per cent since mid-September – and the United States.
In the latest auction, butter fell 3.6 per cent, while the price for the key New Zealand export product, whole milk powder, was down 5.5 per cent.
Wobbles in the whole milk powder price were expected after the milk futures market showed a figure of $2925 per tonne at the beginning of the week, down 6.5 per cent since the last auction on October 17.
The ASB said recent price weakness was linked to the seasonal peak in auction volumes.
«For now we stick with our 2017-18 milk price forecast of $6.75/kg, but the latest weak auction poses a downside risk to our view.»
AgriHQ analyst Amy Castleton said there was less demand from North Asia, with Chinese buyers likely to have fulfilled their needs to land milk powder whilst the lower tariff rate applies from January 1.
The amount of WMP was at its seasonal peak, so buyers would not have felt they needed to compete too hard for product.
«The fall in WMP prices will increase the pressure on milk price forecasts. The AgriHQ milk price forecast for the 2017-18 season calculated after the October 17 GDT event was $6.36/kgMS, 39c lower than Fonterra’s $6.75/kgMS forecast. The AgriHQ forecast will be revised tomorrow, but will likely decline further.»
Skim milk powder prices lifted 1.2 per cent, as did anhydrous milk fat (0.5 per cent). The cheddar price index was down 2.8 per cent, with the average price US$4001 per tonne. Cheddar has been expected to stay around this price level. Butter milk powder spiked 7.2 per cent, while casein fell 4 per cent.
There were 133 winning bidders at this event, and 35,072 tonnes of product was sold.
 

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