Friday, March 29, 2024

Dairy prices down 0.6% in latest GDT auction

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Dairy product prices slipped to the lowest level in two years in the latest GlobalDairyTrade auction, as lower prices for skim milk powder and cheddar outweighed increases for butter and anhydrous milk fat.
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Commodities, dominated by dairy products, are central to New Zealand's export returns and help drive the economy. Yesterday the Treasury cut its short-term forecasts for economic growth and tax revenue, citing weaker prices for export commodities.

Still, it expected prices to stabilise near current levels, saying factors driving them lower were short-term, not structural.

The GDT price index slipped 0.6% to US$3000 a tonne, down from US$3025 two weeks ago. Some 46,387 tonnes of product was sold, down from 48,380 tonnes two weeks ago.

In the latest auction, skim milk powder plunged 12% to US2874 a tonne, while cheddar slumped 7.9% to US$3453 a tonne.

Butter milk powder fell 2.5% to US$3886 a tonne, while rennet casein slipped 0.8% to US$9601 a tonne.

Whole milk powder rose 3.4% to US$2804 a tonne, while anhydrous milk fat gained 3.6% to US$3566. Butter rose 4.9% to US$2940 a tonne.

Neither lactose nor sweet whey powder were offered at the event.

The NZ dollar was trading at US0.8443 before the release, and recently traded at 0.8441.

There were 141 winning bidders out of 181 participating bidders at the 13-round auction. The number of qualified bidders fell to 650 from 668 at the last auction.

The auction results "were pretty mixed – it doesn't portray a bounce back in prices," ANZ rural economist Con Williams said.

"Perhaps it suggests some stabilisation or consolidation.”

Williams said the drop in skim milk powder was a concern but also the movement in whole milk powder price index across the five contracts on offer.

While the October through December contracts gained about 4%, the January gain was a more subdued 2.4% and the February contract declined 5.7%.

"If you thought Chinese buying would be stronger later in the year you would expect to see a premium in those later contracts," he said. Chinese demand would typically pick up then because of that country's own seasonal supply curve.

Federated Farmers vice-chairman Andrew Hoggard said the result underscored how similar this season was to 2012-13.

“At a similar point two seasons ago, the average winning price was just US$54 more except it had come up from the high 2000s.

He said there were two critical things to look at in the latest auction result.

“They are the number of winning bidders as well as the volume of product won.

“We are encouraged to see the latest auction sold the most volume since January in the old season, while the last four auctions this season have seen a large number of winning bidders.

“As we said after the last auction result, we saw more buyers and they bought more product so things are looking up, if not the price yet.”

While the result was pleasing, it was just one result, and the messages to farmers remained the same “play it tight for this season,” Hoggard said.

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