Friday, March 29, 2024

AgriHQ Farmgate Milk Price crashes as dairy commodities prices collapse

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GlobalDairyTrade delivered a disasterous result at the auction held overnight. The GDT Price Index fell by 10.6%, its largest fall in the past 12 months.
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The AgriHQ 2015-16 Farmgate Milk Price has decreased to $4.22/kg milksolids (MS). That’s down 83c on a fortnight ago and $1.27 lower than a month ago. This compares with Fonterra’s 2015-16 milk price forecast of $5.25/kg MS.

AgriHQ dairy analyst Susan Kilsby commented: “NZX Dairy Futures prices have dived since the last GDT event, suggesting market participants are now taking a much dimmer view towards a price recovery. This was the biggest driver of the latest decline in the AgriHQ 2015-16 Milk Price.”

“Farmers now face two consecutive seasons of extremely low milk prices. The majority of farmers can’t breakeven at such a low milk price.

“A $1/kgMS drop in the milk price equates to approximately $2 billion less income for dairy farmers.

“Farm debt levels will rise. Rural communities will suffer as farmers reduce spending to the bare essentials,” Kilsby said.

Source: NZX

The GDT Price Index fell by 10.6% at the July 15 auction. This is the largest fall in the GDT Price Index since April 1, 2014. The published average sale price was just US$2082/t but much of the product sold below this price. 

“Many of the products offered by Fonterra sold at their opening prices. Fonterra typically sets its opening prices about 15% below the previous auction price. This indicates there was not sufficient demand from buyers to push prices any higher.”

“The NZX Futures market anticipated whole milk powder (WMP) prices would fall overnight. However the market underestimated the size of the fall.” 

The WMP Price Index fell by 13.1%. The specific grade of WMP that the NZX Dairy Futures contracts settle against fell 15% to US$1705/t.  

Fonterra offered 15,575 tonne of WMP at the auction. The volume to be offered at the next auction is forecast to rise to 29,550t.

“It is difficult to anticipate a quick recovery in prices with the volume of product on offer forecast to increase.” 

The AgriHQ Snapshot Farmgate Milk Price decreased by 70c to $3.17/kg MS. The lower NZ dollar did little to offset the sharp drop in dairy commodity prices at the GDT auction. This price is an indicator of what the milk price would be if the GDT prices from the July 15 auction were achieved across the entire season. 

GDT Price Indexes were down for virtually all products traded. WMP declined by 13.1%. Skim milk powder was also considerably weaker, down 10.6%. Cheddar values fell the most at the auction, down 13.9%. Butter and anhydrous milkfat fell by 9.5% and 10.6% respectively. Lactose was the sole product to post a rise with the Lactose Price Index gaining 1.9%.

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