Forecast farmgate milk price likely to hold despite drop in auction prices, analyst says
Index down 6.3%, whole milk powder tumbles 12.4%.
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A significant drop in dairy product prices at the Global Dairy trade auction shows dairy giant Fonterra Cooperative Group did the right thing in recently holding its forecast farmgate milk price at $6 per kilogram of milk solids, says AgriHQ dairy analyst Susan Kilsby.
While a drop had been expected, the fall was more significant than that due to supply of skim milk powder being larger than previously anticipated.
The GDT price index slid 6.3% from the previous auction two weeks ago to $US3512. Some 22,328 tonnes of product was sold, up from 20,479 at the previous auction.
Whole milk powder sank 12.4% to $US2782 a tonne while the biggest drop came for skim milk powder - down 15.5% to $US2118 a tonne,
Improved milk intakes in recent months mean Fonterra has more product available to sell than previously anticipated, Ms Kilsby says.
"To see prices falling again before the market has fully recovered will be a disappointment to farmers," Ms Kilsby says.
"While one poor result doesn't have a huge impact on the milk price, it will be difficult for prices to recover quickly while there is surplus product available."
But she says she doesn't expect Fonterra to make another revision of the forecast farmgate milk price unless the market continues to crash for the rest of the season.
At the latest GDT auction, rennet casein dropped 6.6% to $US5678 a tonne, lactose declined 4.3% to $US924 a tonne, while cheddar fell 4.2% to $US3435 a tonne, and anhydrous milk fat slipped 0.8% to $US5653 a tonne.
Meanwhile, butter milk powder jumped 8.4% to $US1846 a tonne, while butter gained 1.2% to $US4653 a tonne.
The New Zealand dollar last traded at 69.83USc at 12.55pm in New York, compared with 69.94USc at 5pm in Wellington the previous day.
There were 113 winning bidders from 134 participating at the 10-round auction. The number of qualified bidders was 530, the same as at the previous auction.
(BusinessDesk)
Margreet Dietz
Wed, 08 Mar 2017
Wed, 08 Mar 2017
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Forecast farmgate milk price likely to hold despite drop in auction prices, analyst says
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