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Dairy prices rise, volumes down at auction: NZ’s Fonterra

20 August 2015 03:02 am - 0     - {{hitsCtrl.values.hits}}

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REUTERS: Global dairy prices bounced off a 12 1/2-year low after the supply offered at the latest auction dropped, spurring demand after months of absence of big buyers including Chinese processors.

The benchmark Global Dairy Trade (GDT) price index jumped 14.8 percent at fortnightly auctions held yesterday by New Zealand dairy exporter Fonterra, recovering from its lowest levels seen since November 2002 hit at the previous sale.

Yesterday’s auction saw its highest participation levels of the year. 

Many buyers have stayed out of the market for months because of slowing economic growth in China and global oversupply of milk products.
Prices jumped after an ongoing slump in global demand led to a 32 percent drop in the GDT index since the start of the year. 

That prompted Fonterra, the world’s largest dairy exporter, to reduce the amount of commodity dairy products it offers at the auctions for the next 12 months.
A total of 36,904 tonnes of milk powders, butter, cheese and other commodity dairy products was sold at yesterday’s auction, a drop of 20.7 percent from the previous sale.

“This hefty reduction in the volume available on GDT was the trigger required to turn market sentiment,” dairy analysts at AgriHQ said in a note.

But they added, “Global dairy markets remain over supplied. Until global milk supply slows the market will remain very volatile.”

Average prices for all products rose 8.8 percent to US $ 1,974 per tonne, pulling back from a record low of US $ 1,815 hit at the last auction.

A 26.6 percent jump in anhydrous milk fat and a 19.1 percent climb in whole milk powder, New Zealand’s biggest export earner, drove the latest gains, although average prices remain less than half that of record highs near US $ 5,000 touched in October 2013.

The rise seen at the latest auction has stemmed a dramatic slide in global dairy prices seen so far this year, which has prompted Fonterra to slash its forecast farmgate price to a 10-year low and cut hundreds of jobs while tightening its spending plans.

Global dairy prices have fallen sharply from record highs as slowing growth in China, the Middle East and some emerging markets has cooled demand for protein from their growing middle classes. Meanwhile, Russian import sanctions and high milk production have ramped up global supply.

Weak dairy prices have slashed farmer incomes in New Zealand and may pose wider risks to the economy of the world’s largest dairy exporting nation. 
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