Whole milk powder pricing drops 4.5%

Dairy product prices were steady at the Global Dairy Trade auction, as a drop in whole milk powder (New Zealand's biggest export) offset gains in cheddar and butter amid concern about increasing supply.

The GDT price index was unchanged in percentage terms from the previous auction two weeks ago, coming in at $US2339, compared with $US2329 at the previous auction. Some 23,089 tonnes of product was sold, down from 24,046 at the previous auction.

Whole milk powder dropped 4.5% to $US2118 a tonne.

"The GDT result indicates the market is still weak which is a concern as volumes are forecast to lift in the next few months as more new season product is offered," AgriHQ dairy analyst Susan Kilsby says in a note. "In the current environment, it is difficult to see prices move substantially higher before the end of the year."

Source: GlobalDairyTrade. Click to zoom.

The AgriHQ Snapshot milk price dropped 31c to $3.91 on the weak whole milk powder prices and the stronger New Zealand dollar, according to Ms Kilsby.

The snapshot milk price indicates what the farmgate milk price would be if all of the season's product was sold at June15 GlobalDairyTrade prices and at the existing exchange rate.

"Businesses participating at the National Fieldays being held in Hamilton will be disappointed with last night's results which will have done little to boost industry confidence," Ms Kilsby says. "Dairy farmers will be using Fieldays as an opportunity to hunt down a bargain but spending is expected to be limited as farmers keep a firm lid on costs."

Still, the AgriHQ 2016-17 milk price has lifted to $4.75 on the back of stronger prices for dairy commodities futures.

At the GDT auction, rennet casein slipped 0.4% to $US5116 a tonne, while butter milk powder dropped 6.6% to $US1695 a tonne.

Meanwhile, lactose eked out a 0.6% gain to $US754 a tonne, while skim milk powder rose 1.5% to $US1901 a tonne.

Anhydrous milk fat climbed 4.4% to $US3619 a tonne, butter gained 5.3% to $US2910 a tonne, while cheddar rallied 6.9% to $US2882 a tonne.

The New Zealand dollar last traded at 70.64USc at about 2.18pm in New York, compared with 69.93USc at 5pm in Wellington the previous day.

There were 114 winning bidders from the 168 who participated in the 13-round auction. The number of qualified bidders was 601 at this auction.

(BusinessDesk)