Dairy product prices slide on increasing overseas supply

Dairy product prices fell to a more than two-month low in the latest GlobalDairyTrade auction, weakening for a third consecutive auction, amid an increase in international supply and a subdued outlook.

The GDT average winning prices dropped 7.9% to $US2345, the lowest since the September 1 auction and down from $US2569 at the previous auction two weeks ago.

Some 30,044 tonnes of product was sold, down from 33,997 tonnes of product two weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price dropped 44c to $4.27 per kilogramme milk solids. This is lower than Fonterra's current 2015-16 milk price forecast of $4.60/kgMS.

"At present buyers are generally well stocked and have ample supply options for dairy commodities," AgriHQ dairy analyst Susan Kilsby says. "Therefore, we currently see very little urgency from buyers."

"The drop in milk output from New Zealand in recent months has been matched threefold by the increase in production from Europe," Ms Kilsby noted. "Until global milk supplies drop further, prices are expected to remain soft."

Whole milk powder sank 11.0% to $US2148 a tonne, while skim milk powder dropped 8.1% to $US1851 a tonne.

The outlook for whole milk powder has deteriorated in the past two weeks, Ms Kilsby says.

The NZX Dairy Futures market indicates that whole milk powder prices will reach $US2400 a tonne by July 2016, having fallen $US400 a tonne in the past fortnight.

Anhydrous milk fat slid 5.9% to $US3430 a tonne, while cheddar retreated 5% to $US2874 a tonne.

Rennet casein fell 4.4% to $US5250 a tonne, while lactose declined 2% to $US503 a tonne, and butter milk powder slipped 1% to $US1825 a tonne.

In a single bright spot, butter gained 5.6 % to $US2709 a tonne.

The New Zealand dollar last traded at 64.62US at about 11.25am in New York, compared with 64.93USc at 5pm in Wellington the previous day.

There were 117 winning bidders from 141 participating bidders at the 13-round auction. The number of qualified bidders dropped to 609, down from 643 at the last auction.

(BusinessDesk)

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