Wednesday, 05 August 2020 09:38

Dairy price fall not unexpected

Written by  Sudesh Kissun
Whole milk powder prices were down 7.5% and skim milk powder prices were down 4.6%. Whole milk powder prices were down 7.5% and skim milk powder prices were down 4.6%.

Dairy prices tumbled in the overnight Global Dairy Trade (GDT) auction, but analysts aren’t surprised.

ASB senior economist Chris Tennent-Brown says after the large jump in prices last month, some retracement was expected.

The result would still be disappointing for farmers, he says.

Whole milk powder prices were down 7.5% and skim milk powder prices were down 4.6%. Anhydrous milk fat prices rose 3%, but remain significantly lower than year-ago levels. Tennent-Brown says following the previous GDT event a fortnight ago, ASB lifted its forecast for the 2020/21 season from $6.50 to $6.75. 

“We had been factoring some retracement of the large jump in prices that we saw in July, and this is happening. “Prices need to stabilise around the current levels to support our milk price forecast.”

He noted that in the overnight auction prices for whole milk powder fell across all contracts.

“We attributed some of the strength in near-term prices back in July to buyers adding some padding to stocks as a risk management strategy given the acceleration in global COVID-19 cases and increased potential for logistics disruption.

“That pressure seems to have reduced, with near-term contract prices around $3,050 to $3,100 per tonne. 

“Longer-term contract prices have dipped back below $3,000 per tonne, so buyers are clearly less concerned about supply further into the season. 

“One factor here could be reports of excellent conditions in the Waikato over recent months, with above-average grass growth at present and calving well underway.”

Key results

AMF index up 3.0%, average price US$3,994/MT

Butter index down 2.8%, average price US$3,438/MT

BMP index down 6.5%, average price US$2,259/MT

Ched index down 5.3%, average price US$3,568/MT

LAC index up 5.7%, average price US$1,349/MT

SMP index down 4.6%, average price US$2,583/MT

SWP index not available, average price not available

WMP index down 7.5%, average price US$3,003/MT

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