Latest lift in auction prices is an encouraging sign for the fortunes of dairy farmers

The good  news   was  running  in  favour  of  New Zealand’s  meat  producers early this week.  Today it is running in  favour  of our  dairy  farmers.

The  first  Fonterra  global  dairy  trade  auction in  three weeks  had  the  most  bidders  in  a  year and  charted  prices  on   a  rising  trend,  confirming  the  firm  tone  at the  previous  event   was  not  a  one-off.

The global dairy trade price index posted its biggest increase since early March, when it jumped 15%.

The key WMP product rose 3.3%, SMP was up 7.3% and both butter and cheese each rose almost 4%. Prices rose 4% overall in USD terms, although they were only up 1.2% in NZD terms, held back by a firming currency.

The average price for WMP was  US$3691 (NZ$5200) a tonne, with gains across all contract periods. The average price is sitting 24%  higher than at the same time last year. Continue reading “Latest lift in auction prices is an encouraging sign for the fortunes of dairy farmers”

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.

Farmers may not get much from the Budget but prospects are looking good in export markets

The agriculture sector may not get the recognition it deserves in this year’s budget, nor much assistance along  the  road  to  reducing  methane emissions — but  at  least farmers  can take  satisfaction (as New Zealand  emerges into  the  post-Covid  era)  that  returns   for the  bulk of the  sector’s output  have  been  strong.  The prospects are that high prices for  most products will be  sustained  next season.

The latest  Global  Dairy Trade  auction this week saw prices  easing  slightly—but  for  the product  that bears  the  greatest influence  on Fonterra’s  farmgate milk price, whole milk powder, it is still 54%  higher  than  at this time  in the  previous season.

Analysts are confident it will stay around that  level next season.

The other encouraging sign for primary producers  is  that  prices  in the  meat  sector  are  buoyant.  This  week  Westpac lifted its farmgate lamb forecast to at least $8/kg, and sees it possibly rising to over $9. Continue reading “Farmers may not get much from the Budget but prospects are looking good in export markets”

Two big announcements awaited from Fonterra – one deals with dairy payout, the other with the co-op’s capital structure

So what  are  the  chances Fonterra’s  payout  to its farmer-suppliers  could  top  $8kg/MS the  soon-to-end  current  season?

That would give a  timely  boost  to  the  rural economy  and give  farmers  the kind  of  surge  in incomes  which  would encourage them  to  step up the  pace  of  adapting their dairy farming practices as  the  country  moves  to meet its  climate  change goals.

In March, Fonterra raised its forecast milk price for this season to between $7.30 and $7.90kg/MS with a mid-point of $7.60. That was up from $7.14 last season.

But now, after several  good  results  from the fortnightly GDT auctions, and indications from futures contract prices, the  speculation  is that the payout  could go  higher.

While the GDT index slipped 0.7% at the latest auction this week, the price of whole milk powder, which has the most impact on what farmers are paid, gained 0.7% to an average US$4115 (NZ$5756) a tonne while skim milk powder, the second-most important, rose 2% to US$3433/t.

Butter prices slumped 12% to US$5035/t, weighed down by extra volume on offer. Continue reading “Two big announcements awaited from Fonterra – one deals with dairy payout, the other with the co-op’s capital structure”