A leading United States dairy commentator is warning of lower dairy prices in coming months.Following on from an average 7% drop on Fonterra's online auction system, globalDairyTrade, further decreases are expected due to a range of factors.Professor Bill
A leading United States dairy commentator is warning of lower dairy prices in coming months.
Following on from an average 7% drop on Fonterra’s online auction system, globalDairyTrade, further decreases are expected due to a range of factors.
Professor Bill Bailey, director of Western Illinois University’s agriculture department, predicted increases late last year for NBR, but then said they would level off.
In ASB’s weekly commodities report, Prof Bailey said it appeared as if a near-term market top has been reached.
He said the United States dairy industry had became an important world participant.
“The consistent ability of US dairy farmers to defy expectations and keep production up is noteworthy,” he said.
Prof Bailey said another factor that could put pressure on prices was an indication that European milk production might take advantage of large quotas for growth.
But complicating the prediction was further melamine contaminations issues in China.
“Given the close commercial relationship between China and new Zealand, China might turn [to New Zealand] to increase its already high import levels of milk powder,” Prof Bailey said.
However, with dairy production in New Zealand by dry conditions, the possibility of meeting a surge in milk powder demand from China was limited.
“If China turns elsewhere for its powder, world prices could easily move up.”
Fonterra has yet to respond to questions about China’s increasing demand.
The dairy giant’s current payout forecast is $5.70 per kilogram of milksolids (kgMS) with a distributable profit of 35c kgMS. The total payout of the season is predicted to be $6.05kgMS.
