No butter upside in dairy slide

Butter lovers should not expect prices to fall in stores soon, despite a meltdown of 15.6 per cent in prices on the GlobalDairyTrade (GDT) auction since early October.

Overall dairy prices fell again in the latest auction for the fourth consecutive decline, this time by

3.4 per cent to US$2970.

The GDT is now at its lowest point since early March 2017.

As a result ASB analyst Nathan Penny has trimmed the bank’s

2017-18 milk price forecast by 25 cents to $6.50 per kilogram of milksolids. Fonterra’s forecast remains at $6.75 per kg/MS.

Penny said the lower New Zealand dollar was providing some offset to falling dairy prices, but not enough to stave off the milk price revision.

Referring to butter prices, he said they were still historically high and demand was buoyant.

‘‘Retail prices reflect the average price over a much longer period. It’s still over US$5000 a tonne and up until May this year it had never been over $5000.

‘‘There is a worldwide shortage – we still expect prices to stay high until the middle of next year.’’

The raw product sold on GDT did not reflect other factors going into retail prices, which included wages, packaging and transport.

The latest dairy price decline followed a 3.5 per cent drop at the last auction two weeks ago, the largest fall since January, when the first GDT auction of the year dropped by 3.9 per cent.

The price of butter fell 5.9 per cent, cheddar was down more than

4 per cent, and New Zealand’s key export product, whole milk powder (WMP), slipped 2.7 per cent to

US$2778 per tonne.

WMP is the most important product traded at the GDT auction, accounting for more than 50 per cent sold, and is the usual benchmark for the price farmers are paid.

AgriHQ said a further decline in WMP prices was no surprise, owing to the higher production out of New Zealand, with buyers unlikely to feel much urgency to buy product right now.

New Zealand milk production for the season is now predicted by ASB to be 3 per cent higher than last season, after a slow start this spring when bad weather hampered milking.