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.
The GDT price index fell 3.5%, compared to the previous auction. Whole milk powder price, the main tool used by Fonterra to determine its farm gate milk price, was down 1.8% to US$2599/metric tonne.
The WMP price has failed to rise in nine consecutive GDT auctions and is at a two-year low.
Fonterra is required to give a milk price forecast for Dairy Industry Restructuring Act (DIRA) purposes by 15 December 2018.
On August 31, the co-op revised its 2018/19 forecast farm gate milk price from $7.00/kgMS to $6.75/kgMS.
However, available market information forced the co-op to lower the forecast milk price even further on October 10. The co-op slashed its milk price from $6.75/kgMS to a range of $6.25 to $6.50.
Key results
AMF index down 9.4%, average price US$4,577/MT
Butter index down 9.6%, average price US$3,637/MT
BMP not offered
Ched index up 0.2%, average price US$3,252/MT
LAC index up 1.1%, average price US$920/MT
RenCas index down 4.5%, average price US$5,067/MT
SMP index down 1.6%, average price US$1,965/MT
SWP index not available, average price not available
WMP index down 1.8%, average price US$2,599/MT
