Fourth successive drop in dairy trade auction
TRADE tensions between the United States and China may be behind the fourth consecutive decline in the fortnightly global dairy trade auction.
The overall price index retreated 1.7% from the auction of two weeks ago, where a 5% fall was booked.
Analysts believe the trade tensions are increasing the risk of more declines.
Declines in rennet casein and butter outweighed a surprise gain in whole milk powder.
ASB senior rural economist Nathan Penny said dairy markets remained ‘‘nervous’’ about the USChina trade tensions.
‘‘We expect that dairy market nervousness is likely to continue in the short term, particularly as the trade tensions could escalate further,’’ he said in a statement.
He said while the overall index had fallen 9% over the past two months, that was a ‘‘modest move’’ compared to the past, when 20% was considered a more significant move.
‘‘This downward move could have been worse,’’ he said of weakened currencies in key dairy markets.
He said it seemed relatively healthy global dairy demand was still underpinning prices.
However, he said a ‘‘watching brief’’ would be kept on USChina developments, given there was the potential for further fallout in the dairy markets.
ASB was maintaining its 201819 forecast payout of $6.50 a kg of milk solids, against Fonterra’s present $7 forecast.
AgriHQ dairy analyst Amy Castleton said there were more buyers from North Asia at this event, so it was likely Chinese buyers bought some coverage for the medium term, according to a BusinessDesk report.
‘‘There were some declines in whole milk powder prices, for product shipping in August, December or January.’’
‘‘Buyers are relatively comfortable in the short term, and as there is a possibility that prices will decrease, they will be unwilling to purchase product too far out.’’
At the auction, skim milk powder rose 0.8% to $US1959 ($NZ2887) a tonne, but rennet casein plunged 9.5% to $US4602 a tonne and butter sank 8.1% to $US4953 a tonne. Butter milk powder traded at $US2225 a tonne, BusinessDesk reported.