Country’s main export takes dive at dairy auction
New Zealand’s main dairy export, whole milk powder, took a dive at the latest Globaldairytrade (GDT) auction overnight on Tuesday.
The price for whole milk powder (WMP) plummeted 12.4 per cent to US$2782 per metric tonne, following a drop of 3.7 per cent at the previous auction on February 21.
Overall, dairy prices slumped for the second straight auction, dipping 6.3 per cent to US$3512 per metric tonne.
Federated Farmers dairy spokesman Andrew Hoggard said the fall would probably not threaten Fonterra’s farmgate forecast payout of $6 per kilogram of milksolids but might ‘‘take the gloss off’’ next season’s opening prices.
‘‘Recently I asked whether the higher global prices were due to a drop in production or an increase in demand,’’ Hoggard said.
‘‘I think the answer is clearer, that it’s because of a drop in production.’’
Fonterra recently revised its forecast for 2016-17 New Zealand milk collection from 7 per cent to 5 per cent.
ASB economist Nathan Penny said the bank would be lowering its present payout prediction of $6.50, but would not yet indicate the revised figure.
However, he said it stood by its longer-term forecast of $6.75 for the 2017-18 season.
‘‘There’s more milk around now than expected as lost production has been made up, so prices will be weak for a period,’’ Penny said.
He agreed with Hoggard that Fonterra’s price should stand, as the dairy giant had taken a conservative position when it recently fixed it at $6.
Agrihq said but improved milk intakes in recent months mean Fonterra has more product available to sell than previously anticipated.
‘‘Last night’s result shows just how tightly balanced the market is – there just isn’t the depth of demand in the market to absorb any extra product,’’ analyst Susan Kilsby said yesterday.
Last week Fonterra increased the amount of skim milk powder and whole milk powder available at the March 7 GDT event. The volumes available of each rose 49 per cent and 6 per cent respectively.
Milkfat products did a lot better than powder. Demand for butter and anhydrous milkfat (AMF) has been very strong throughout the season driven by dietary trends away from synthetic products such as margarine.
Regular-grade AMF was priced at US$5515 a tonne, just 0.8 per cent less than at the previous auction, while butter recorded a 2.3 per cent lift in price with unsalted product with a May shipping date making US$4700 a tonne.
There were 134 participating bidders, with a total of 22,328 metric tonnes of product sold.