Dairy prices slide to lowest in six years

Dairy product prices fell in the latest GlobalDairyTrade auction, hitting the lowest level in nearly six years, amid concern about the end of European milk quotas, Russia's trading embargo and sluggish Chinese demand.

The GDT average winning prices slid 4.3% to $US2412, down from $US2472 at the previous auction two weeks ago. It was the lowest level since August 2009. Some 27,711 tonnes of product was sold, up from 26,535 tonnes of product two weeks ago.

"The fall in GDT prices was not expected. Before the auction the NZX Dairy Futures market had anticipated that milk powder prices would rise," AgriHQ dairy analyst Susan Kilsby said in a note. "However it appears buyers did not share that positive sentiment."

The AgriHQ Seasonal Farmgate Milk Price for the 2015-16 season increased 3c to $5.63 a kilogram milksolids following the latest GDT auction. The AgriHQ Seasonal Farmgate Milk Price for the 2014-15 season has been revised up 2c to $4.52/kgMS. This increase was solely due to the weaker New Zealand dollar, Kilsby noted.

The New Zealand dollar is trading near the lowest level against the greenback in almost five years, amid expectations that the US Federal Reserve will lift interest rates this year.

Butter slid 10% to $US2619 a tonne, while anhydrous milk fat dropped 7.4% to $US3112 a tonne. Butter milk powder fell 7.0% to $US1795 a tonne, while lactose declined 6.9% to $US540 a tonne.

Rennet casein shed 4.4% to $US5789 a tonne, whole milk powder fell 3.1% to $US2,309 a tonne, while skim milk powder slipped 1.3% to $US1,982 a tonne,

Cheddar sold at $US3055 a tonne, up from $US2,745 a tonne at the previous auction two weeks ago.

Sweet whey powder was not offered at the latest event.

"It was surprising to see such weak results for the milkfat products, because in the US and European markets there is steady support for butter," Kilsby said. "New Zealand butter and AMF [anhydrous milk fat] is currently the world's cheapest source of milkfat."

The New Zealand dollar last traded 1.3% higher at 71.86USc at about 1:32pm in New York, compared with 70.93USc at 5pm in Wellington the previous day.

There were 115 winning bidders out of 148 participating bidders at the 12-round auction. The number of qualified bidders fell to 642, down from 687 at the last auction.

(BusinessDesk)