Dairy product prices extends plunge to fresh six-year low

Dairy product prices extends plunge to fresh six-year low

Aug. 5 (BusinessDesk) - Dairy product prices plunged still lower in the latest GlobalDairyTrade auction, paced by a drop in milk powders as supply surges.

The GDT average winning prices sank 9.3 percent to US$1,815, down from US$2,082 at the previous auction three weeks ago. It was the lowest level since August 2009. Some 46,527 tonnes of product was sold, up from 31,691 tonnes of product three weeks ago.

“Farmers now face two consecutive seasons of extremely low milk prices,” AgriHQ dairy analyst Susan Kilsby said in a note. “Very few farmers will be able to turn a profit at such a low milk price.”

The AgriHQ 2015-16 Farmgate Milk Price decreased to $3.34 per kilogram milk solids, down 90 cents from the previous auction held three weeks ago. This compares with Fonterra’s 2015-16 milk price forecast of $5.25/kgMS which it is expected to revise at the end of this week.

“Many of the products offered by Fonterra sold at their opening prices,” Kilsby noted. “This indicates there was not sufficient demand from buyers to match the larger quantities of product offered.”

The volume of whole milk powder offered was 78 percent greater than at the previous auction, according to Kilsby.

“Clearing the greater volume of product offered was always going to be a challenge in today’s weak market,” Kilsby said. “However, it is still very disappointing that many prices didn’t move above their opening levels.”

Skim milk powder dropped 14.4 percent to US$1,419 a tonne, anhydrous milk fat sank 11.7 percent to US$2,253 a tonne, while whole milk powder fell 10.3 percent to US$1,590 a tonne.

Butter retreated 6.1 percent to US$2,293 a tonne, while butter milk powder declined 5.1 percent to US$1,700 a tonne, and rennet casein gave up 2.7 percent to US$5,289 a tonne.

Cheddar eked out a 0.2 percent gain to US$2,663.

The New Zealand dollar last traded at 65.41 US cents at about 2:25pm in New York, compared with 65.63 US cents at 5pm in Wellington the previous day. The currency was trading above 88 US cents a year ago.

Alessio de Longis, a money manager in the Global Multi-Asset Group at OppenheimerFunds in New York, told Bloomberg that he expects the Kiwi to fall to as low as 50 US cents in the next one to three years.

There were 142 winning bidders out of 152 participating bidders at the 12-round auction. The number of qualified bidders rose to 637, up from 628 at the last auction.

(BusinessDesk)

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