Milk volumes affect values

Prices slipped again in this week's GlobalDairyTrade auction, as strong late-season New Zealand milk production continued to make its mark.

The index was down 2.6%, with a 4.9% fall in butter prices, 4.4% drop in skim milk powder and a more modest 1.6% decline in whole milk powder prices.

Prices might dip further this season before recovering in the second half of the year, ASB rural economist Nathan Penny said.

The index was down 19% since December and, at the same stage in 2012, it was down a similar 21%, Mr Penny said.

While it was late in the season, the recent falls were enough to ''take the cherry off the top'' of this season's milk price, he said.

ASB had trimmed its farm gate milk price forecast to $8.50kg ms. However, the extra production should largely offset the lower milk price.

Looking ahead, the bank was maintaining its 2014-15 season forecast at $7.80, although it was keeping it under review.

A lower milk price was a ''distinct possibility'', particularly if the New Zealand dollar stayed stronger for longer than the bank had factored in, Mr Penny said.

Meanwhile, lamb prices continued to improve, averaging 18% higher than the same period in 2013.

He expected lamb prices to continue to rise over the remainder of the year, due to improving international demand and tight local and Australian supply.

However, prices remained below the five-year average for this time of year and the lingering effect of drought was still slowing production.

Wool prices were ''going nowhere fast'' and it would be another season before sheep sector incomes returned to pre-drought levels, he said.

After strong rises over 2013, wool prices had given back some of their gains in 2014. March average prices for coarse wool (35 micron) were 4% lower than the average for December last year. Prices remained 7% above year-ago levels, a recent ASB report said.

Demand from developed economies remained key to wool markets and wool prices.

Overall demand was tentatively improving. The housing market in the United States was better but recent weather disruptions had slowed the improvement.

Demand for US apparel was also better and, while European demand was ''showing signs of life'', it remained fragile.

ODT/directory - Local Businesses

CompanyLocationBusiness Type
Wanaka Trading PostWanakaFarming Supplies
Lawrence Area SchoolLawrenceSchools
Calder Stewart Steel LtdMiltonFarm Machinery
Southern Lakes Heleski LtdQueenstownRecreational Activities