Dairy product prices fall, bleak outlook for milk powder

Dairy product prices slipped, paced by anhydrous milk fat, in the latest GlobalDairyTrade auction, falling to the weakest level in almost six years.

The GDT average winning prices fell 1.3 percent to US$2,409, down from US$2,412 at the previous auction two weeks ago. It was the lowest level since August 2009. Some 24,047 tonnes of product was sold, down from 27,711 tonnes of product two weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price decreased 14 cents to $5.50 per kilogram milksolids following the latest GDT auction.

Fonterra offered just 10,000 tonnes of whole milk powder at the June 16 auction, which was the least amount of whole milk powder made available this year to date, according to AgriHQ dairy analyst Susan Kilsby. The quantity of whole milk powder available on GDT is forecast to rise from July as new season product starts to be forward sold, she added.

"It will become harder for prices to recover as the volume of milk powder on offer increases as the new dairy season progresses," Kilsby said in a note.

Anhydrous milk fat sank 8.9 percent to US$2,814 a tonne, while lactose declined 2.8 percent to US$525 a tonne. Skim milk powder slipped 0.2 percent to US$1,978 a tonne, while whole milk powder dipped 0.1 percent to US$2,327 a tonne.

On the flip side, butter milk powder jumped 10.0 percent to US$1,975 a tonne, while rennet casein climbed 4.3 percent to US$6,126 a tonne.

Butter gained 3.3 percent to US$2,707 a tonne, while cheddar rose 2.4 percent to US$3,128.

Sweet whey powder was not offered at the latest event.

The New Zealand dollar last traded at 69.87 US cents at about 2:40pm in New York, compared with 70.00 US cents at 5pm in Wellington the previous day.

The Reserve Bank of New Zealand last week cut its cash rate and signalled more cuts ahead.

"A weaker New Zealand dollar is welcomed by our dairy farmers as this improves returns at the farmgate and helps to reduce the impact of the very low milk prices," Kilsby said.

There were 125 winning bidders out of 156 participating bidders at the 12-round auction. The number of qualified bidders rose to 649, up from 642 at the last auction.

(BusinessDesk)