Dairy prices have fallen at the Fonterra GDT auction this week. The average price at the fortnightly sale fell 3.5% to US$3911 ($NZ6830) a tonne, after rising 2% in the previous auction.
Prices have generally been falling since hitting a record high in March. But with the NZ dollar now down around the US57c mark, the impact of the latest fall on the farmgate payout will not be as great as it at first appears.
The price of wholemilk powder, which strongly influences the payout for farmers, fell 4% to US$3573 a tonne.
Prices for other products fell also: butter was down 7% to $4983,skim milk powder down 1.6% to $3497, and cheddar down 3.8% to $4,966.
NZX dairy analyst Alex Winning said a significant lack of demand arriving at this auction has resulted in a red screen of price declines.
“Demand to supply ratios at this auction were almost half of what arrived at the previous auction.”
The amount of product on offer was up on previous auctions, which Winning said was a factor in the weaker prices, as was the weak demand coming from Chinese buyers.
“The lack of Chinese demand remains the big unknown for the wider dairy market, everyone on the sell side is still waiting with bated breath for the Chinese buyers to rally the market higher.
“Conversely, everyone else on the buy side of the market is most likely relieved not to be competing with strong Chinese demand while prices for everything else are climbing”.
Winning said the weakness in prices perhaps mirrored the wider macro-economic environment.
“It is tough on the ground for consumers and the tail wind of steady demand from consumers is likely to be fading”.
Dairy giant Fonterra has cut the 2022/23 milk payout forecast by 25ckg/MS to a mid-point of 9.25kg/MS.
The new range is $8.50-$10.00kg/MS. However the current advance payment rate of $5.70kg/MS remains unchanged.
Fonterra also reported a 5% drop in local milk collection in August.
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