This comes as Fonterra increased the price it pays to its suppliers by 6c/kg of butterfat and 15c/kg protein last week and says it has an average price of $5.20 a kilogram of milk solids.
Commonwealth Bank agri-commodity strategist Tobin Gorey said Global Dairy Trade auction prices were “roughly in the right place” and reflected market fundamentals such as the substantial production decline in New Zealand and decline in Australia as well as reduction of excess global dairy supply.
“Is it going to go higher than here? Probably not, but the global supply and demand balance is better than it was,” he said.
“The worst days are behind us.”
Mr Gorey said while the industry still had other issues to deal with as a result of the farmgate milk price cuts last April and May, global dairy returns had improved. But Victorian prices still largely remain at less than the cost of production for many farmers.
Dairy Australia analyst John Droppert said global prices were consolidating following earlier gains based on sentiment. He said dairy fat remained in short-supply and prices were not likely to drop in the short-term. Powders, on the other hand, were a “little more fragile” as buyers waited on the northern hemisphere flush of product and took into account EU stockpiles of skim milk powder.
The market was waiting for northern hemisphere production.
“The GDT, and anyone competing with big volumes, will come under pressure from EU new-season supply,” he said. “Those sellers, especially Australian sellers who have been challenged by volume a bit have more scope when dealing with (buyers) who need the product (for a specific reason). Sometimes they are prepared to pay a little more.”
Source: WeeklyTimes
Link: http://www.weeklytimesnow.com.au/agribusiness/dairy/global-dairy-price-worst-days-over-says-bank-analyst/news-story/c587c0899aca7d9082da44c8687577a1