Dairy prices suffer 5% slide at auction
Dairy prices suffered a big drop at the global auction overnight Tuesday, with declines across the board including a 2% decline for butter.
The global dairy trade (GDT) price index was down 5% on the last auction for an average price of US$4166 a tonne.
The whole milk powder price index dropped 5.1%, with the average price for all contracts now sitting below US$4000 (NZ$6691.91) a tonne.
The average winning price of whole milk powder decreased to US$3757/t.
NZX Dairy insights manager Stuart Davidson said the auction outcome was unsurprising, ‘‘albeit a little hard for Kiwi farmers to swallow at this point in the season.
‘‘There was little doubt that this auction outcome was going to precipitate; every indicator over the last fortnight has been signalling a coming serious slide or correction, call it what you will.’’
Extra volumes on the GDT platform and expectations of market pressures on end consumers had created a market that expected prices to fall significantly lower,
Davidson said. Skim milk powder prices had the largest fall at this event, down 8.6% to finish the auction at US$3709/t on average, bringing the average below US$4000/t for the first time since February. Anhydrous milkfat prices fell 2.1%, butter prices fell 2.1% and cheddar prices dropped 2%.
Key market participants were still at the auction, but with very different buying habits to those of six months ago, Davidson said.
North Asian buyers managed to purchase the largest volume of dairy overall, but purchased significantly less whole milk powder than at the previous auction, while Southeast Asian and European buyers significantly increased their purchase volumes.
North Asian buyers secured the most butter, marginally more than at the previous auction. Butter purchases were more spread across the regions.
The big theme of this auction was very light demand at the initiation of the auction; each commodity started bidding rounds with very lacklustre demand to supply ratios, Davidson said.
‘‘It could be expected that prices will start to find support at these levels soon and look to track higher again into peak New Zealand milk on the back of more agreeable prices for the wider market.’’