Dairy prices slip for fourth straight auction

Dairy product prices fell in the latest GlobalDairyTrade auction, sliding for the fourth consecutive time in 2016, as concern about worldwide oversupply weighs on sentiment.

The GDT average winning price decreased 2.8% to $US2235, down from $US2276 at the previous auction two weeks ago. Some 22,021 tonnes of product was sold, down from 24,474 tonnes of product at the previous auction two weeks ago.

To be sure, the decline wasn't as much as some had feared.

"Prices achieved at the GDT event were actually higher than anticipated," AgriHQ dairy analyst Susan Kilsby said in a note. "Ahead of the auction, the NZX Dairy Futures market indicated we could see a 4% drop in the whole milk powder for product with an April 2016 delivery date. Instead, the price reduction for this particular contract was less than 3%."

The AgriHQ 2015-16 Farmgate Milk Price declined 27c to $4.05 per kilogram milksolids, moving below Fonterra's 2015-16 milk price forecast of $4.15/kgMS.

While market sentiment for whole milk powder had improved somewhat over the past few days, the outlook remains gloomy, Ms Kilsby noted.

Source: GlobalDairyTrade. Click to zoom.

10-year price trend. Source: GlobalDairyTrade. Click to zoom.

"Overall market sentiment still remains very bearish meaning a sustained price recovery is unlikely to occur until the later part of 2016," Ms Kilsby said. "Prices are now at very attractive levels for buyers which will stimulate a little extra demand but while global milk supplies continue to grow it is difficult for a sustained market recovery to occur."

Rennet casein dropped 11.5% to $US3852 a tonne, while cheddar declined 5.6% to $US2535 a tonne.

Whole milk powder slid 3.7% to $US1890 a tonne while butter eased 2.3% to $US2834 a tonne.

Skim milk powder fell 1.4% to $US1762 a tonne while butter milk powder slipped 1.2% to $US1496 a tonne.

Lactose was steady $US574 a tonne.

Anhydrous milk fat rose 1.5% to $US3527 a tonne.

The New Zealand dollar last traded at 65.61USc at about 11.40am in New York, compared with 66.48USc at 5pm in Wellington the previous day.

There were 115 winning bidders out of 151 participating bidders at the 14-round auction. The number of qualified bidders fell to 604, down from 619 at the previous auction.

(BusinessDesk)