Dairy prices dip again in latest auction, SMP surpasses WMP

For the second event in a row, prices have eased slightly in the Global Dairy Trade auction - falling 1.0 per cent across the board.

Whole milk powder (WMP) - which has the biggest influence on Fonterra's farmgate milk price - slipped 1.5 per cent to an average US$4532/MT.

Meanwhile skim milk powder (SMP) - Fonterra's second biggest reference product - went in the other direction to lift 1.0 per cent to an average US$4599/MT, surpassing the average price paid for WMP by $67.

Butter softened slightly - down 0.6 per cent to an average US$6891/MT, but still US$2000 above where it was sitting six months ago.

Lactose, followed suit with a 0.6 per cent dip as well, to an average US$1598/MT.

Meanwhile cheddar lifted 2.7 per cent to an average US$6472/MT. Again this is more than US$2000 up on six months ago.

Anhydrous milk fat fell 2.5 per cent to an average US$7111/MT, while butter milk powder recorded the biggest increase - up 6.3 per cent to an average US$4461/MT.

Sweet whey powder was yet again not available at this event.

The volume of product traded was down significantly on the previous event, at 21,511 MT sold to 101 successful bidders.

Fonterra in February lifted its 2021/22 forecast farmgate milk price range to NZ$9.30 - $9.90 per kgMS, up from NZ$8.90 - $9.50 per kgMS.

This increased the midpoint of the range, which farmers are paid off, by 40 cents to $9.60 per kg, which would be the highest ever paid.

It was a "mixed result", Rabobank senior dairy analyst Emma Higgins said.

Supply and demand remained "broadly intact" but China's zero-Covid lockdowns had affected this particular event, Higgins told The Country's Jamie Mackay.

"With lockdowns what we tend to see are disruptions to people movement and then broader issues along the whole supply chain as well, particularly with logistics."

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There was a noticeable pullback in Chinese participation in this GDT event, particularly with whole milk powder Higgins said.

In previous events, the majority of WMP buy-in came from the North Asia/China market, but this time the bulk of it was sold to the South East Asia/Oceania region, along with Africa and the Middle East, Higgins said.

While this demand helped keep prices elevated, it showed China as "the ultimate price pillar," and a key market for dairy, Higgins said.

Also in today's interview: Higgins talked about how inflation and the Ukraine/Russia war could affect the market.