Dairy product prices drop to nine-month low as March volumes jump

Con Williams, agri economist at ANZ Bank New Zealand

Dairy product prices fell to the lowest trade-weighted price in nine months, led by anhydrous milk fat and rennet casein, in a third decline on Fonterra Cooperative Group's GlobalDairyTrade auction site.

The GDT price index dropped 5.2 percent to US$4,563 per tonne from the last sale two weeks ago, the lowest price since June last year. Some 39,008 tonnes were sold at today's auction, taking the total for March to 80,094 tonnes, double the 37,916 tonnes sold in March last year.

"The market seems to be struggling to digest the recent lift in near-term volumes offered (most of which is whole milk powder)," Con Williams, ANZ Bank New Zealand rural economist, said in a note. "The recent broadening in dry weather conditions (despite recent rain) suggests there won't be a long tail to the New Zealand season despite the current record milk price for 2013/14 and ability to feed supplement."

Rennet casein prices fell 11 percent to US$10,533 a tonne and anhydrous milk fat dropped by the same amount to US$4,578 a tonne. Whole milk powder, the biggest product sold by volume, fell 5.8 percent to US$4,439, its biggest decline since June last year.

The auction comes ahead of government figures which are expected to show New Zealand's annual current account deficit narrowed to $7.41 billion in the three months ended Dec. 31 from $8.77 billion in the September quarter. The country's terms of trade are at a 40-year high and have helped underpin the local export sector, with massive Chinese demand for dairy products.

Skim milk powder prices fell 1.7 percent to US$4,584 a tonne, the first time it's been more expensive than whole milk powder. Butter prices fell 4.4 percent to US$4,534 a tonne.

Butter milk powder prices were the biggest gainer, up 4.6 percent to US$5,253 from the last auction, followed by a 3.7 percent gain in milk protein concentrate to US$8,837 a tonne. Lactose wasn't offered at the event.

There were 142 winning bidders of 187 participating bidders at the auction over 10 rounds. The number of qualified bidders fell to 747 from 796 at the last auction.


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