Saturday, March 30, 2024

Milk price crashes after GDT

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A disastrous GlobalDairyTrade auction overnight cut 83 cents off the AgriHQ Farmgate Milk price to send it crashing to $4.22/kg of milksolids.
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The GDT Price Index fell by 10.6%, its largest fall in the past 12 months.

The AgriHQ Milk Price is now 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.

 “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,”AgriHQ dairy analyst Susan Kilsby said.

“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/kg MS drop in the milk price equates to about $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.

This overnight GDT price had the largest fall in the GDT Price Index since April 1, 2014.

“The published average sale price was just US$2082 a tonne 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,” Kilsby said.

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 15,575t 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,” Kilsby said.

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 milk fat 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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