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Dairy product prices slide amid confidence in outlook for supply

Fonterra lifted its WMP offer volumes from forecasts last week.

Margreet Dietz
Wed, 18 Oct 2017

Dairy product prices fell at the Global Dairy Trade auction, dropping for the sixth time in nine auctions, amid bets on sufficient supply.

The GDT price index fell 1% from the previous auction two weeks ago to $US3204. Some 35,669 tonnes of product was sold, down from 37,990 tonnes at the previous auction.

Whole milk powder slipped 0.5% to $US3014 a tonne.

"Falling New Zealand milk production should be supporting whole milk powder prices; however Fonterra also lifted its WMP offer volumes from forecasts last week," AgriHQ dairy analyst Susan Kilsby says.

"Buyers seem to be confident that they will be able to source WMP when they need it so are not competing too hard for product."

"Prices for contracts with later shipping dates fell more than the nearer-dated contracts," Ms Kilsby says.

"The WMP contracts due to be shipped before the end of the year were sold at a premium-most likely finding support from Chinese buyers who are looking to secure product to land in China early in January within the lower tariff window."

At the latest GDT auction, rennet casein dropped 8.6% to $US5612 a tonne, while skim milk powder slumped 5.6% to $US1797 a tonne.

The slide in skim milk powder prices was unexpected, according to Ms Kilsby.

"Skim milk powder prices have been driven by factors surrounding the European government-run intervention scheme," Ms Kilsby says.

"There is speculation that SMP may not be bought in at a fixed price under this scheme next year, which would effectively remove the price support that Europe has for SMP."

Butter declined 2.5% to $US5736 a tonne, while cheddar fell 0.1% to $US4107 a tonne.

Bucking the trend, anhydrous milk fat rose 5.2% to $US6841 a tonne.

"Anhydrous milk fat has been undervalued on a milkfat-content basis compared to butter for a number of months now, so a lift in AMF prices and a fall in butter prices goes some way to correcting this gap," Ms Kilsby says.

Buttermilk powder was not offered at this event.

No prices were available for lactose.

The New Zealand dollar last traded at US71.64c at 1.29pm in New York, compared with US71.71c at 5pm in Wellington the previous day.

There were 137 winning bidders out of 165 participating at the 16-round auction. The number of qualified bidders rose to 544, up from 541 at the previous auction.


Margreet Dietz
Wed, 18 Oct 2017
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Dairy product prices slide amid confidence in outlook for supply