It’s a price-sensitive market, but dairy farmers should still be happy with how the season is tracking

As the government, and New Zealanders, count the cost  of the damage done by Cyclone Gabrielle, it may be  some relief to be assured that the big industries  which  earn the bulk of  NZ’s foreign exchange are still plugging  away.

For  example, at the latest Fonterra GDT auction this week, 30,693 tonnes of product was sold at an average price of $US3414 ($NZ5174) a tonne.

This was lower than at the previous auction, when it had  risen 3.2%, but only by 1.5%.

Relief for dairy farmers as prices rebound at latest GDT auction, with buyers chasing product across the board

Fonterra’s  farmers  will  be  relieved that prices in the Global Dairy Trade auction this week have rebounded – up 3.2%  across the board.

It is the first rise since December 6  The index had fallen 2.8% on January 3 and 0.1% on January 17, to kick off 2023 on a sour note for dairy farmers.

“Significant price gains across each contract period highlight that buyers were chasing product across the board,” said NZX dairy insights manager Stuart Davison.

The lift will add to the view that whole milk powder prices were expected to increase on the way into the second half of 2023, he said.

Few favourable economic signals in sight, but there’s a glimmer of light in GDT dairy export prices

Kiwis  returning  to  work after their summer  breaks  and  scanning the  economic horizon  may  find  few encouraging signals. Even  the  agricultural sector,  which proved  to be  the  mainstay at the height of the Covid pandemic, is  now having to navigate  the inflation  raging in the domestic sector.

As  well, as  Point of  Order noted at  the  beginning of  December, NZ  exports have been hit by falling world prices and a rising NZ dollar. It  was a sharp reversal from earlier in the year when ANZ Bank  was reporting its  commodity price index  had returned to its record breaking run  and stood  nearly  20%  above the level  where it had been  12 months previously.

So  there  may have been a glimmer  of  light in the  latest Fonterra GDT auction at which 31,872 tonnes of dairy product was  sold at  an average price of $US3,393  ($NZ5,280) a tonne,only 0.1% lower than at the previous  auction, when prices fell 2.8%.

The key product  of  WMP was  0.1% higher  at $US3,218 a tonne, while  cheddar also  rose, by 4% to $US4,871.

Butter  fell 0.6% to $US,4,449,and SMP 0.3% to $US2,842.

Cheddar  prices  have proved  to be the  most  resilient. Analysts  say  GDT cheddar continues to be a strong option for global buyers, especially when compared with EU or US options, most likely the reason the GDT price is steady   in the $4800  range.

If the  market has  stabilised, it  will be  welcome news  to Fonterra’s  famers,  but  also at  its Auckland HQ where  there might have been concern  that another  adjustment to its payout forecast, lowered  to  a  range of  $8.50-$9.50  in December, might have had  to be  considered.  

World dairy prices tumble further as farmers face the prospect of being charged for livestock emissions

As debate rages in New Zealand’s farming industries over the Ardern  government’s  plan  for  charges  on  agricultural emissions, prices at Fonterra’s  Global  Dairy  Trade fortnightly auction  have fallen to their lowest level in nearly two years.

The average price at the sale fell 3.9%  to US$3537 (NZD$6054) a tonne, after falling 4.6% in the previous auction.

Prices have generally been falling since hitting a record high in March, and are now at their lowest level since January last year.

Wholemilk powder fell 3.4%  to US$3279 a  tonne and  skimmilk  powder 8.5% to US$2972  a  tonne, while  butter  was  marginally  up at US$4868  a  tonne  (though  a  long way  down  from  its peak  in  March  above  US$7000 a  tonne)  and cheddar 0.9% to US$4802 a tonne.

Fonterra’s competitors challenge its capital restructuring plan – but the co-op has the backing of our Agriculture Minister

New Zealand’s   big  dairy  company, Fonterra,  has  come  under  pressure   from  two  directions  this  week.  First,  its  fortnightly GDT auction registered  another   fall  in  prices. Second,  it  faced  fire   from   four  of  its  competitors which  lobbied  the  government against  its  capital  restructuring  plan.

On  the  first issue, the latest  sale  has  taken  the GDT index  to  the  lowest level  since  January  last  year, although  what  may  soften that particular  blow  is  the  devaluation  of  the  local  currency. The  NZ dollar is  now  trading well  down against  the  greenback at US56c ,  from where  it  was  then,  around US70c.

The average price at the  auction fell 4.6% to US$3723 a tonne, after falling 3.5% in the previous auction.

Oops – the world price dips for dairy products but low NZ dollar is a compensating factor

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.

Latest dairy auction prices turn upwards again while farmers can turn their cows with a high-tech collar

As  the  weather  brightens  in  the  dairy  provinces  so  too did prices  at  the  latest Fonterra  GDT  auction.  And  with  the  prospect  of a constrained  supply of milk  in international markets,  some   suppliers may  be  wondering  why  Fonterra   moved last week  to lower  its  forecast  payout  range.

ANZ’s  agri-economist Susan  Kilsby   had  a  different  view, raising  her team’s forecast,  on the basis that “milk supplies are constrained due to high farm input costs”. So the lack of supply is countering the weak demand at present.

The 4.9%  rise in the  index at  the  auction snapped  a run of five consecutive declines. The  quantity  sold was  27,127 tonnes. Wholemilk powder rose 5.1% to $US3610 a  tonne.

NZX  dairy  insights  manager Stuart Davison thinks  it is too early to say the market has turned,

“… but it is clear that the global dairy market is willing to chase product at current price points, and that demand is apparent.This result should also be a clear signal too that some of the market are likely starting to price in an expected lack of milk supply.”

Global dairy auction prices fall again as consumer spending is bruised by inflation

A slide  in  prices  at the  latest Fonterra  GDT  auction  may be  a  wake-up  call  to  dairy farmers    that  they   are  operating   in  a  global  market  hard  hit  by  inflation.

They  may be operating   in   a  higher-cost  environment but  consumers in their  markets  are suffering, too,  from soaring  costs.

The average price  at the fortnightly sale dropped 5% to $US4166 a tonne, after falling 4.1% in the previous auction.  That is the lowest price since early October last year and 18%  below the record set in March.

Prices have fallen in eight of the past nine auctions.

Skim milk powder prices had the largest fall at this event, down  8.6% to finish the auction at US$3709/t on average,  the first time since February.

Fonterra announces record opening milk price payment for its farmers next season as demand remains strong

New Zealand  has  suffered  several  jolts  in  the  past week, not  least a  higher interest rate regime as the Reserve  Bank counters  surging inflation.  But  at least  one  beacon of  light shines through the gloom:  the country’s leading primary  export  industry’s boom   is  moving  to a  second  season  of high prices.

Dairy  giant Fonterra,  which sets  the  pace  for  other dairy processors,  has announced a record opening milk price payment for farmers next season amid expectations of continued strong demand for dairy products and constrained global supply.

The co-op expects to pay farmers between $8.25 and $9.75kg/MS  for the season starting next month.  The mid-point, on which farmers are paid, is $9 kg/MS.

That breaks the previous record set at this time last year, when Fonterra’s opening price for the current season was $7.25 – $8.75kg/MS, with a mid-point of $8kg/MS.

Dairy prices fall sharply but farmers will do nicely, thank you, from this season’s payout and Synlait has strong half-year

Only  two  months  ago  Radio NZ  was  airing  a  report “Why  are global dairy  prices  so high?”  Now, the  story  is  rather  different  after  two sharp  falls  at  Fonterra’s  fortnightly  global dairy  auctions,  and  the  pundits   are  pondering  what  has  happened.

But  NZ’s  dairy farmers  can still rest  easy  that  this  season’s  payout  will be  the  highest in Fonterra’s  history.

The  latest fall this  week was  foreshadowed  in  a  report  by ANZ  agri-economist  Susan Kilsby  on commodities. She  noted  dairy prices fell 4% month-on-month in April, driven primarily by lower prices for whole milk powder which is highly influenced by demand from China.

Kilsby  went  on to  point  out market sentiment had deteriorated as the lockdowns in Shanghai and Beijing impact consumer buying opportunities.

“The global supply of milk increases at this time of the season due to the Northern Hemisphere reaching peak milk output, but global production still remains relatively tight, which will limit how far prices fall”.

 Kilsby said it was becoming increasingly difficult to get refrigerated goods into China.