Bumping the bottom? Dairy product prices fall to six-year low

Dairy product prices continued their slide, paced by whole milk power, in the latest GlobalDairyTrade auction, weakening to the lowest level in six years.

The GDT average winning prices dropped 5.9 percent to US$2,276 from US$2,409 at the previous auction two weeks ago. It was the lowest level since July 2009. Some 33,200 tonnes of product was sold, the highest volume since the January 6 auction and up from 24,047 tonnes of product two weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price decreased 45 cents to $5.05 per kilogram milksolids following the GDT auction. That compares with Fonterra’s 2015-16 milk price forecast of $5.25/kgMS.

“The NZX Futures market anticipated whole milk powder prices would fall overnight. However the market underestimated the size of the fall,” AgriHQ dairy analyst Susan Kilsby said in a note.

Whole milk powder sank 10.8 percent to US$2,054 a tonne, butter milk powder shed 8.1 percent to US$1,878 a tonne, and skim milk powder declined 5.8 percent to US$1,875 a tonne.

“The last time milk powder prices were this low was six years ago,” Kilsby said. “At that time demand was limited due to the Global Financial Crisis.”

And the outlook is not favourable.

“It will be difficult for dairy commodity prices to increase significantly in the coming months as the quantity of milk powder available on GDT will rise with New Zealand’s seasonal increase in production,” Kilsby said.

Cheddar dropped 4.9 percent to US$3,060, while rennet casein fell 4.1 percent to US$5,901 a tonne, and butter slipped 0.3 percent to US$2,694 a tonne.

In contrast, anhydrous milk fat rose 1.6 percent to US$2,855 a tonne.

Sweet whey powder was not offered at the latest event. For lactose, no average price could be calculated because the product was either not offered, not sold, or sold at the starting price (and therefore no price was published).

The New Zealand dollar last traded at 67.52 US cents at about 1:55pm in New York, compared with 68.00 US cents at 5pm in Wellington the previous day.

There were 140 winning bidders out of 158 participating bidders at the 11-round auction. The number of qualified bidders rose to 652 from 649 at the last auction.

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