Dairy price declines have resumed with a 4.9% fall in this
week's GlobalDairyTrade auction, putting pressure on
Fonterra's milk price forecast for the new season.
The previous fortnightly auction was the first increase after
eight consecutive falls and it had been seen as a hopeful
sign of prices stabilising.
In this week's auction, butter was down 13.6%, anhydrous milk
fat down 7.4% and whole milk powder dropped 5.4%. Butter milk
powder was up 4%.
ANZ economists have downgraded their 2014-15 milk price
forecast to $6.25kg ms, which was in marked contrast to the
$7kg ms opening milk price forecast announced by Fonterra in
That represented about a $3 billion fall in dairy incomes
from the record 2013-14 season, they said.
Westpac senior economist Michael Gordon said dairy prices
were now below where they were last February before the
''scarcity premium'' resulting from a drop in global supply
started to kick in.
Westpac would be reviewing its forecast over the next week
but it was likely to be ''something below $7'', Mr Gordon
ASB senior economist Chris Tennent-Brown said the biggest
price declines for whole milk powder were in the near-term
contracts, but all longer-term contracts still dipped,
suggesting buyers were confident of ''ample'' supply well
into next season.
While skim milk powder prices did not decline as much as
whole milk powder, the downward slope of the contract curve
suggested the same lack of concern for future supply.
''That lack of concern is understandable now for least,'' Mr
On top of New Zealand's bumper season, European production
this year was thought to be several percent higher than last
year, and United States production for the first quarter of
2014 was up about 1% over last year.
The ANZ commodity price index posted a fourth successive
monthly decline in June, easing 0.9% in the month to be 6.7%
below the February peak. Eight commodities reported a
weakening in prices, six firmed and three were unchanged.
The largest fall was in the price of apples, which fell 6%,
which was a typical pattern for the time of year as the
northern hemisphere export season evolved.
Log prices dropped 5% and whole and skim milk powder prices
Dairy and forestry have fallen to 16- and 14-month lows
respectively, while horticulture and aluminium commodity
prices have increased to 12- and 14-month highs respectively.
Meat prices have risen to a 14.5-year high and seafood prices
remain at an all-time high.
Separately, the Rabobank Rural Confidence survey released
yesterday showed lower optimism among local dairy farmers
because of rising interest rates, a strong exchange rate and
falling global milk prices.