Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
WMP (NZ's most important product) picked up 3.4%, but overall prices were down 0.6%, says ASB rural economist Nathan Penny in a statement.
Higher prices for later-dated contracts hint at support for prices later in the season, he says. All up though, it is difficult to draw many conclusions from this auction – as a result, our milk price forecast for the 2014/15 season is unchanged at $5.80/kg of milk solids.
Overall prices now stand 39.2% lower than a year ago, he says. WMP prices are down further, recording a 45.4% fall since this time last year. Since the most recent peak in February of this year, overall prices are down 41%.
SMP posted the largest fall, dropping 12% overnight. Cheddar also fell nearly 8%, while BMP and casein also posted small falls. In addition to WMP, AMF and butter posted rises of 3.6% and 4.9%, respectively.
Forward prices continue to point to future price support. For example, near-dated WMP contracts are at or under US$2,800/MT, while later-dated contracts are closer to US$2,900/MT. SMP contract prices show a similar pattern.
"There were no clear signs of Russian purchases in the auction. Russia's key imports are butter and cheese and with butter and cheese prices up and down, respectively, we have no clear indication either way on Russian auction participation."
