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

 

Half Empty: Fonterra's 2017 Opening Forecast Below Expectations

Fonterra Cooperative Group raised its forecast farmgate milk payout for next season by less than expected as the world's largest dairy exporter predicts lower prices will crimp production and supply will pick up. The New Zealand dollar fell. More>>

ALSO:

Pest Control: Mouse Blitz Team Leaves For Antipodes

The Million Dollar Mouse project to rid Antipodes Island of mice is underway with the departure of a rodent eradication team to the remote nature reserve and World Heritage Area. More>>

Gongs Got: Canon Media Awards & NZ Radio Awards Happen

Radio NZ: RNZ website The Wireless, which is co-funded by NZ On Air, was named best website, while Toby Manhire and Toby Morris won the best opinion general writing section for their weekly column on rnz.co.nz and Tess McClure won the best junior feature writer section. More>>

ALSO:

Pre-Budget: Debt Focus Risks Losing Opportunity To Stoke Economy

The Treasury is likely to upgrade its forecasts for economic growth in Budget 2016 next week but Finance Minister Bill English has already signalled that more of his focus is on debt repayment than on fiscal stimulus or tax cuts... More>>

ALSO:

Fulton Hogan's Heroes: Managing Director Nick Miller Resigns

Fulton Hogan managing director Nick Miller will leave the privately owned construction company after seven years in charge. The Dunedin-based company has kicked off a search for a replacement, and Miller will stay on at the helm until March next year, or until a successor has been appointed and a transition period completed. More>>

ALSO:

Gordon Campbell: On Electricity, Executions, And Bob Dylan

The Electricity Authority has unveiled the final version of its pricing plan for electricity transmission. This will change the way transmission prices (which comprise about 10% of the average power bill) are computed, and will add hundreds of dollars a year to power bills for many ordinary consumers. More>>

ALSO:

Half Empty: Fonterra NZ, Australia Milk Collection Drops In Season

Fonterra Cooperative Group says milk collection is down in New Zealand and Australia, its two largest markets, in the first 11 months of the season during a period of weak dairy prices. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news