That fall was cushioned by the lower New Zealand dollar, AgriHQ dairy analyst Susan Kilsby said.
And increased supplies of milk powder coming onto the market as the milk season ramps up will make it difficult for dairy commodity prices to recover significantly in the next few months, she said.
NZX Futures prices for later dated contracts had decreased in the past fortnight.
The average sale price at the auction was reduced to US$2276/t.
“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 10.8%. The specific grade of WMP that the NZX Dairy Futures contracts settle against fell 12.5% to US$2000/t.
“The last time milk powder prices were this low was six years ago. At that time demand was limited due to the Global Financial Crisis.”
Milkfat was better supported at the latest auction.
The Butter Price Index dropped by 0.3% but the nearby contract price firmed a little. Anhydrous milk fat (AMF) prices were generally firmer. The AMF Price Index increased 1.6%.
“It will be difficult for dairy commodity prices to increase significantly in the coming months as the quantity of milk powder available on GDT will rise with NZ’s seasonal increase in production,” Kilsby said.
Fonterra offered 15,575t of whole milk powder (WMP) last night.
The same amount was forecast to be offered at the next auction but by the August 4 auction the volume on offer was forecast to rise to 29,550t.
The AgriHQ Snapshot Farmgate Milk Price decreased by 38c to $3.86/kgMS.
“The lower NZ dollar partially offset the 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 1 auction were achieved across the entire season.”
WMP declined most at the auction, dropping 10.8% to average US$2054/t. Skim milk powder was also considerably weaker, down 5.8% to average US$1875/t. Cheddar values had previously been trending up but decreased by 4.9% to US$3060/t. Rennet casein prices were 4.1% weaker at US$5901/t.
Download the GDT price report from NZX Dairy Derivatives which outlines the winning prices used in NZX Futures Settlement.
