Auction prices were up 1.4% to a $2640 a tonne average but the AgriHQ Seasonal Farmgate Milk Price now sits at $4.75/kg milksolids, 30c below where it was previously. Fonterra’s forecast for the season is $5.30/kg MS which is 55c above the AgriHQ Farmgate Milk Price.
The AgriHQ Snapshot Farmgate Milk Price indicates that if the latest GlobalDairyTrade prices were achieved across the entire season the milk price would be just $3.90/kg MS.
“The improvement in prices at last night’s auction is a good start but we need to see a continuation of this upward trend for farmgate milk prices to improve.
“Despite the higher whole milk powder price the AgriHQ Seasonal Farmgate Milk Price has fallen further as the recovery in dairy commodity prices is now expected to be slower.”
The NZX Dairy Futures market indicates that whole milk powder will not exceed US$3000/tonne until April. Two weeks ago prices were expected to be back at that level by the end of the year.
“A farmgate milk price below $5/kg MS will make it extremely difficult for farms to turn a profit this season.
“Farmers will cut spending wherever they can, which in turn will impact on businesses that supply products and services. “The lack of profitability in the dairy sector will initially be felt in our small rural towns but eventually the downturn will impact on New Zealand’s whole economy.”
Last week Fonterra reduced the volume of whole milk powder it plans to sell on GlobalDairyTrade over the next 12 months by 7%.
“The lower volume of product on offer is likely to provide some support to prices but as volumes are close to their seasonal highs it will take some time for this market to fully recover,” Kilsby said.
At the auction anhydrous milk fat was up 7.4% to US$3346 a tonne, sweet whey powder rose 4.3% to US$1225 a tonne, butter was up 3.9% to US2614 a tonne and whole milk powder rose 3.1% to US$2503 a tonne.
Cheddar fell 1% to US$3007 a tonne, skim milk powder was down 3.6% to US$2462, butter milk powder was down 3.8% to US$2685 a tonne and rennet casein dropped 5.3% to US$7780 a tonne. There were 132 winning bidders out of 167 participants at the 14-round auction. The number of qualified bidders rose to 668, up from 657 at the last auction.
