Dairy product prices increase amid outlook for lower supply

Dairy product prices rose at the Global Dairy Trade auction, as whole milk powder increased on the outlook for reduced supply from Fonterra, the world's top dairy exporter.

The GDT price index rose 2.2 percent from the previous auction two weeks ago to US$3,124. Some 25,400 tonnes of product was sold, down from 29,592 tonnes two weeks ago.

Whole milk powder rallied 4.2 percent to US$2,886 a tonne.

"Last week Fonterra announced that it now expects its milk intakes for the 2017-18 season to be about 4 percent lower than last season as dry conditions limit pasture production," Amy Castleton, AgriHQ dairy analyst, said in a note. "It also advised that it had started to reduce the volume of whole milk powder (WMP) available on the GDT platform in response to the lower outlook for its milk supply."

"The reduction in the volume of WMP available at this auction and subsequent GDT events led the market to believe a substantial lift in price would occur," Castleton said, adding that the NZX Dairy Derivatives market had closed for the New Year holiday period before Fonterra advised the cut in its milk production forecast.

"The direction of the price movement was aligned with market expectations although the lift in the price of regular grade WMP for March delivery of 3.5 percent was well below the 6 percent anticipated by NZX Dairy Derivatives market participants," according to Castleton.

At the latest GDT auction, skim milk powder gained 1.6 percent to US$1,699 a tonne, while butter rose 0.6 percent to US$4,501 a tonne.

Meanwhile, butter milk powder dropped 7.3 percent to US1,866 a tonne, while cheddar declined 2.1 percent to US$3,317 a tonne.

Rennet casein fell 1.1 percent to US$4,419 a tonne, while anhydrous milk fat slipped 0.2 percent to US$6,405 a tonne.

No prices were available for lactose.

The New Zealand dollar last traded at 71.08 US cents as of 12.46pm in New York, compared with 71.05 US cents at the previous close in Wellington.

There were 112 winning bidders out of 158 participating at the 16-round auction. The number of qualified bidders rose to 516, up from 509 at the previous auction.

(BusinessDesk)


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I am delighted for our farmers in any rise in their income.
For my money farmers and those that derive a living of the land are the back bone of our country and work so damn hard for their successes.
Even when mother nature throws everything at them, politicians target them and the greenies and the public frequently and often unfairly target them, our farmers just keep on doing their job.

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I too enjoy when dairy farmers receive a bump in their salary. Question is, how much of this are they ACTUALLY receiving? Fonterra just cut the dividend by 10 cents in order to pay for the Danone fiasco. How much is going into Theo and Co's ridiculous salary upgrades this year as well? How much is FSF going to have to write off on the catastrophic BeingMate investments as well (-$470M and counting now...)? Then we need to also factor in continued litigation from Danone and offsetting profits for that.

I despair as this will probably NOT result in any money going into farmers back pockets. 2018 is not going to be a rosy picture for NZ Inc...

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Correct, and it is when the greatly increased northern hemisphere supply season kicks in is when things are going to really "hit the fan".

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