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Dairy prices rise

Dairy product prices rose in the latest GlobalDairyTrade auction.

Margreet Dietz
Wed, 21 Jan 2015

Dairy product prices rose in the latest GlobalDairyTrade auction, bolstered by gains in whole milk powder and rennet casein.

The GDT average winning price increased 1.0 percent to US$2,758, up from US$2,709 two weeks ago. Some 31,326 tonnes of product was sold, down from 33,669 tonnes of product two weeks ago.

ANZ Bank economists this week downgraded their forecast for Fonterra's farmgate milk price to $4.35 per kilogram of milk solids in the current season, below the dairy exporter's current expectation for a payout of $4.70/kgMS.

The bank said dairy prices will probably recover more gradually from last year's halving as other producers, including domestic Chinese production, ramp up supply, and that New Zealand's currency will stay persistently strong, cutting into returns.

Whole milk powder gained 3.8 percent to US$2,402 a tonne, while rennet casein rose 3.3 percent to US$8,159 a tonne. Skim milk powder added 1.0 percent to US$2,389 a tonne, and butter advanced 0.1 percent to US$3,564 a tonne.

The AgriHQ Seasonal Farmgate Milk Price for the 2014-15 season increased by 10 cents per kg milksolids to $4.40 per kg milksolids following the latest GlobalDairyTrade auction. This is comparable with Fonterra's current forecast for the season of $4.70/kgMS.

The AgriHQ Snapshot Farmgate Milk Price indicates that if the latest GDT prices were achieved across the entire season this would equate to a milk price of $4.35/kgMS, a 20-cent increase from the previous auction. This increase was driven by higher prices for whole milk powder at the auction.

"Renewed optimism for the remainder of the season has shown through in an increase in prices on the NZX Dairy Futures market since the January 6 auction," AgriHQ analyst Ivan Luketina said in a note.

"Although milk production in New Zealand is well past its seasonal peak, milk flows are still high at this time of year, so it's hard to see prices rising quickly in this market environment without something significant tipping the supply and demand balance," Luketina said.

"That may yet come, however, if the current dry weather pattern persists in key dairy producing regions of NZ," according to Luketina. "The AgriHQ Milk Production Predictor is already indicating that the weather is having an impact, and it's expected production forecasts will be lowered further when the next revision is done on February 1."

Butter milk powder dropped 6.4 percent to US$2,559, while anhydrous milk fat fell 5.0 percent to US$4,286 a tonne.

Cheddar shed 4.3 percent to US$2,961 a tonne, while sweet whey powder dropped 4.1 percent to US$1,155 a tonne.

Lactose was not offered at the latest event.

The New Zealand dollar last traded at 76.93 US cents at about 12:37pm in New York, down from 77.82 US cents at 5pm in Wellington on Tuesday.

There were 113 winning bidders out of 169 participating bidders at the 12-round auction. The number of qualified bidders rose to 677, up from 671 at the last auction.

(BusinessDesk)

Margreet Dietz
Wed, 21 Jan 2015
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Dairy prices rise
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