Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Dairy prices may dip as record payouts stoke more production

Dairy prices may dip as record payouts prompt farmers to boost milk production

By Tina Morrison

March 28 (BusinessDesk) – Dairy prices will probably decline over the last few months of the New Zealand season as farmers ramp up milk production to benefit from record payouts.

Prices generally hold up on lower volumes heading into the end of the season in May, however volumes will be higher than normal this year as farmers had favourable growing conditions in the lead-up to the main producing season and bought extra feed to increase milk production in anticipation of higher prices, said ASB Bank rural economist Nathan Penny.

Auckland-based Fonterra Cooperative Group, the world’s biggest dairy exporter, last month raised its payout to farmer suppliers to a record level on the back of strong global demand. New Zealand dairy farmers will probably produce 11 percent more milk this season than last season, which will equate to around a 9 to 10 percent increase in volume for Fonterra, ahead of the dairy group’s forecast for a 7.5 percent increase in volume, ASB says.

“Farmers are pretty motivated to get more milk out of their cows given what Fonterra is paying them,” Penny said. “If our production forecast is right, once this milk hits markets, dairy prices will come under further pressure in the tail end of the New Zealand season.”

Whole milk powder fell to US$4,439 a tonne in Fonterra’s most recent fortnightly GlobalDairyTrade auction this month from about $5,000 in February and will probably head down towards $4,000 a tonne over the next few months as the extra volumes hit the market, Penny said. Prices will likely recover again after the end of the season as milk supply peters out, he said.

“Markets plan ahead, they know that New Zealand volumes will decrease at this time of year so they buy in advance of that - now there is going to be more than they anticipated in the market at this time of year, so that will put downward pressure on prices,” Penny said.

Fonterra has the ability to stockpile milk powder for a few months, giving it some flexibility over when it releases the extra volumes, Penny said.

“There’s more production coming Fonterra’s way - it’s just a question of when Fonterra decides to put that milk into the market,” he said. “Eventually they have to get it out the door which means there will be that pressure on prices.”

Dairying makes up almost a third of New Zealand’s export earnings.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Price Of Cheese: Dairy Product Prices Fall To The Lowest This Year

Dairy product prices fell in the latest GlobalDairyTrade auction, hitting the lowest level in the 2015 auctions so far, as prices for milk powder and butter slid amid concern about the outlook for commodities. More>>

ALSO:

Houston, We Have An Air Route: Air New Zealand To Fly Direct To The Heart Of Texas

Air New Zealand will fly its completely refitted Boeing 777-200 aircraft between Auckland and Houston up to five times a week opening up the state of Texas as well as popular nearby tourist states such as Louisiana and Florida. More>>

ALSO:

Scoop Business: Reserve Bank’s Spencer Calls On Govt To Rethink Housing Tax

The Reserve Bank has urged the government to take another look at a capital gains tax on investment in housing, allow increased high-density development and cut red tape for planning consents to address an over-heated Auckland property market. More>>

ALSO:

The Nation: Call For Cross-Party Auckland Housing Plan

Penny Hulse calls for cross-party accord on Auckland housing because “it’s too important to score political points on”. More>>

ALSO:

Flu Season: Overcoming Vaccination Reluctance

While research shows that 40% of New Zealand businesses offer free or subsidised flu vaccinations to employees this time of year, HR professionals say persuading staff to participate is the biggest challenge. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news