Prices have slipped in the latest two GlobalDairyTrade auctions, and Open Country this month reduced its forecast payout by 30 cents to an average price of between $4.00-$4.30/kg MS, lower than Fonterra’s $4.60/kg MS.
Tatuanui-based Tatua will review its forecast payout next month, and while chief executive Paul McGilvary hasn’t seen the numbers yet, he says he’s “quietly confident that we can hold on”.
Fonterra is expected to review its forecast next month, and economists are picking a reduction. Westland Milk’s board will review their payout at a meeting on January 26, while Synlait Milk will update their forecast in early February.
Tatua’s McGilvary said global demand for dairy products is “lacking a bit of horsepower” and supply remains “quite reasonable,” especially from European producers.
“There’s still a fair bit of competition to place product in a world where demand is pretty subdued,” he said.
“You’re seeing on the GDT auction that prices are going nowhere.”
Tatua took in 15.7 million kilograms of milksolids from its suppliers in the 2015 season, and McGilvary said the co-op’s supply this season is pretty much in line with last year.
The dairy producer’s suppliers experienced more rain through Christmas and New Year than they anticipated, and are “more comfortable than they expected to be” as the current El Nino weather pattern threatened drought in parts of the country.
McGilvary said the current market environment is steady, even if it’s not as strong as 2015.
“I don’t think people are particularly upbeat about where the market is, but I don’t think our guys are downbeat either,” he said.
Tatua focuses on value-add ingredients products such as caseinate, whey protein concentrate and anhydrous milk fat.
While commodity products skim milk and whole milk powders are typically regarded as the more volatile markets, McGilvary said value-add products will still feel that.
“All commodities are on the slide, and dairy is not immune from that,” he said.
