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Commodity prices fall for fifth straight month, led by milk powder

New Zealand commodity prices fell for a fifth straight month in July, led by whole milk powder, reflecting a build-up of inventory in China and a strong milk production season for dairy farmers.

The ANZ Commodity Price Index declined 2.4 last month and is now 9.8 percent below its February peak, while milk powder tumbled 12 percent and dairy product prices fell more broadly.

The slide in global dairy prices this year prompted Fonterra Co-operative Group [NZX: FCG] to slash its forecast farmgate milk payout for 2015 to $6 a kilogram of milk solids, from an initial estimate of $7 kg/MS. It also attributed the decline in dairy prices to a build-up of inventory in China but expressed some confidence that prices would recover at some stage. Westland Milk Products cut its forecast payout two days later.

ANZ Rural economist Con Williams said lower prices for whole milk powder have begun to weigh on prices of other dairy products. Last month butter fell 6.8 percent, cheese and skim milk powder were down 2.9 percent and casein fell 2 percent.

Among other export commodities, apples fell 4.3 percent as softer demand in Europe was partly offset by better returns from Asia. Logs declined 2.7 percent and wood declined 2.4 percent.

Among gainers, beef jumped 11.3 percent on a shortage of domestic beef for manufacturing in the US, Williams said. Aluminium rose 5.5 percent, kiwifruit gained 0.9 percent and sheepmeat rose 0.4 percent. The meat sub-group reached a record while aluminium is up 9.5 percent year on year and seafood has gained almost 6.9 percent.

The ANZ NZD Commodity Price Index, which shows the price movements in New Zealand dollars, fell 3.5 percent, reflecting a stronger kiwi dollar when it peaked at 88.35 US cents in the first half of the month.

(BusinessDesk)

Comments and questions
1

China Ministry of Finance provide RMB 1.2 billion to purchase breeding animals and frozen semen for farmers in 2014: According to the news from China Ministry of Finance website, to further develop China’s husbandry industry, MOF will allocate RMB 1.2 billion to improve countrywide genetic and encourage farmers to introduce breeding live animals and frozen semen. In which RMB 661 million subsidy is used on live breeding pigs, RMB 260 million for cows, RMB 45 million for beef cattle and RMB 198 million for sheep.

Michael Boddington from Asian Agribusiness Consulting (AAC) has been involved in agribusiness in Asia since 2000. AAC has office both in Vietnam Ho Chi Minh City and China Beijing. So AAC has a thorough understanding of the Viet Nam and China aqua industry and produces up-to-date research reports on the market. We can offer insights on supply and demand trends and comments on the future structure of Asian agribusiness. If you would like to know more please email michael@boddingtonconsulting.com
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