Milk powder price up, butter slides
Federated Farmers say farmers will be pleased with the latest global dairy auction prices as prices generally flatlined but with a slight fall in the overall index of 1.6 per cent to US$3343 (NZ$4475) per tonne.
Dairy group spokesman Chris Lewis said it was offering a chance for a breather after the roller coaster rides of recent years.
He said the latest Federated Farmers confidence survey showed dairy and arable farmers were the most optimistic, and all regions were showing more optimism compared to the last survey, in January this year.
Butter prices took the biggest hit with a 4.9 per cent drop, but whole milk powder (WMP) rose 1.3 per cent to US$3155.
‘‘With prices stabilising but 50 per cent up on what they were last year, it reflects farmer confidence coming into this season,’’ Lewis said.
‘‘While prices are up 1.3 per cent for WMP and down a bit overall, it won’t be fazing us after the volatility we’ve had for the last five years. The futures market shows prices staying stable through to March-april next year which is great news.’’
Farmers had the confidence that farmgate prices would sit at the $6 to $7 per kilogram of milksolids mark for the next season.
ASB economist Nathan Penny said prices were consistent with its forecast $6.75kg/ms for the 2017-18 season.
‘‘Taking a step back, it’s not altogether surprising that milk fat prices took a breather, given the price explosion over recent months. Butter prices, for example, have surged over 35 per cent this year, while anhydrous milkfat prices have lifted a more modest, but still robust, 18 per cent. Both butter and AMF have set multiple auction record highs over 2017.’’
‘‘However, we suspect that the slowdown in milk fat prices may be temporary. Demand continues to surge and inventories are now very tight. As supply struggles to keep up, we expect that any further lift in milk fat prices will lift dairy prices more generally. Such a lift would break WMP prices out of their holding pattern of recent months,’’ Penny said.
The farmer confidence survey showed
"We suspect that the slowdown in milk fat prices may be temporary." ASB economist Nathan Penny
that compared to 12 months ago, the proportion of farms making a profit had doubled (55.4 per cent versus 27 per cent in July last year). The percentage of all farms making a loss had substantially decreased (9.6 per cent today compared to 42.5 per cent in July a year ago), particularly within dairy and other farm groups (goats, rural butchers, high country, bees), and farms based in the Aucklandnorthland and Otago-southland regions.
A net 32.3 per cent of farmers expected their farm production to increase over the coming year (up 16 points on the January survey) and a net 19.1 per cent expected their on-farm spending to increase over the coming 12 months (up 17 points on January)
A net 35.9 per cent of farmers expect to be able to retire some farm debt over the next year.
Lewis said farmers were well into calving and were just hoping for some drier conditions.
‘‘All farmers are wishing for is that these puddles disappear and they have a steady run. The wild weather of the past few months has taken its toll on beast and man.’’
Agrihq said the market struggled to absorb the extra volume of product available on GDT ‘‘which does not bode well for the coming months when offer volumes continue to lift in line with the seasonal lift in New Zealand’s milk supply’’.
There were 129 winning bidders at this week’s auction, an increase on the 115 winning bidders from two weeks ago. There were more winning bidders from North Asia, South East Asia and Oceania, and the Middle East.
A total of 32,768 tonnes of products were sold compared with July 18 when 26,688 tonnes was traded.