Dairy auction prices deliver a pick-me-up for farmers – and a tonic for the economy, too

New Zealand is back in lockdown and hopes of an early border   reopening  have been dashed, but  the   cows  still  have to  be  milked.  And  injecting  a  cheerful  note  into  an otherwise  downcast  country  this  week,  prices  at   the  latest  Fonterra global  auction  broke  a  losing run of  eight  consecutive  falls,  banishing  fears  that  the  opening  price  for  the  season  might  have to be trimmed.

The co-operative has set the opener  for the 2021/22 season at between $7.25kg/MS to $8.75  with a mid-point of $8. Its previous highest-ever opening price was $7kg/MS.

At  this  auction,  the price  index  lifted  0.3% from the previous auction a fortnight ago,  with the average  price   at US$3,827.  Prices for skim milk powder, butter and anhydrous milk fat rose, while whole milk powder declined. The average price is sitting 21% higher than at the same time last year.

“The cream group and skim milk powder did the heavy lifting, while whole milk powder lost further ground,” said NZX dairy analyst Stuart Davison. “Cheddar prices gained also, while lactose prices finished the auction unchanged.”

The average price for WMP, which has the most impact on what farmers are paid, fell 1.5% to an average US$3552 (NZ$5040) a tonne, after a 3.8%  decline at the previous auction.

“WMP prices continue to let the team down, but it seems that the momentum of the WMP price slide has slowed, and prices might start to find some support in the near future,” Davison said.

North Asia was the largest buyer of WMP, although the region bought less than at the previous auction and significantly lower than at the equivalent event last year, he said. Buyers from the European Union, the Middle East, Africa and South and Central America all purchased more whole milk powder at the latest auction.

“This trend in buying highlights the current level of global demand for dairy products,” he said.

The  very  firm  prices   at  the   auction  confirm that  the  country’s primary   industries  are  still underpinning the export  economy, which  suffered  the loss  of  earnings  from  international tourism  and education when Covid-19  hit.

The ANZ World Commodity Price Index came off its record level  last  month when it eased 1.4%. In local currency terms,  though,  the index barely changed, lifting just 0.1% m/m, as lower commodity prices were offset by a softening in the NZD trade weighted index.

2 thoughts on “Dairy auction prices deliver a pick-me-up for farmers – and a tonic for the economy, too

  1. Our products have a .38c a lb premium over US product at present. Asia has been panic buying up to 70% above previous monthly purchases , I’d buckle up for one hell of a ride the USA is full of product, with huge production increases. The USA is heading for recession and the rest of us will be close on their heels.

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