Dairy price slumps at auction

GERALD PIDDOCK
Last updated 05:00 05/06/2014

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The price the world is prepared to pay for New Zealand milk has dropped 8.5 per cent overnight, concerning Waikato farmers a week ahead of the National Agricultural Fieldays.

The price of wholemilk powder fell to US$3594 per metric tonne in Tuesday night's GlobalDairyTrade auction run by Fonterra, a week after the dairy giant announced it was dropping its forecast payout to farmers to $7 per kg of milk solids compared to this year's $8.40.

Waikato Federated Farmers dairy chairman Craig Littin said the slide in prices was a concern.

"I hope that Fonterra have factored that into their planning," he said.

He did not think it would influence farmer spending at next week's Fieldays. Farmers are used to milk price volatility and plan accordingly, he said.

Prices across all dairy categories fell a further 4.2 per cent at the auction, continuing a trend that has seen them drop 26 per cent in four months.

Prices at the fortnightly GlobalDairyTrade auction have fallen for eight auctions in a row since February 4, with the trade-weighted price index dropping 25.8 per cent from 1482 points to 1099 during that time.

The average winning price at the latest auction was US$3756 (NZ$4456) a metric tonne, down a similar amount (25.5 per cent) from the February 4 peak as the New Zealand dollar stays high against the greenback.

The price drop was the biggest since the auction on April 1, when prices slumped by 8.9 per cent.

The drop was partly due to additional supply becoming available as Northern Hemisphere milk producers hit their peak production, Westpac senior economist Anne Boniface said.

What was unusual was the latest result was the 8.5 per cent drop in the price of whole milk powder.

Northern Hemisphere producers are more important in the international market for skim milk powder, which lifted 2.1 per cent, she said.

"They are less significant players in the whole milk powder market, which New Zealand tends to dominate."

The latest auction saw 37,012 tonnes of dairy products sold, up from 33,677 tonnes at the previous auction.

As well as whole milk powder, rennet casein was down 10.2 per cent, anhydrous milk fat dropped 5 per cent and butter milk powder was down 1.9 per cent. The price of butter was unchanged and cheddar gained 8 per cent.

Next year's forecast is the same as the opening forecast for this season, before milk prices started rising at auction.

gerald.piddock@fairfaxmedia.co.nz

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- Waikato Times

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