Prices were mostly weaker at this morning’s auction, the GDT price index falling by 4.2 per cent, driven mostly by steep falls in the key reference products whole milk powder - down 4.2 per cent at US$3143 a tonne, and skim milk powder - down 4.8 per cent at US$2517/tonne.
Most other products were also weaker, with the exception of anhydrous milk fat, which gained by 2.5 per cent to an average price of US$6794/tonne.
Once again, China was not an active buyer.
HighGround Dairy consultant Stu Davison said this season’s forecast from Fonterra looked to be intact.
“This season’s milk price should not be affected, largely because of how late in the season it is,” Davison said.
“But it will have an impact on next season’s expectations,” he said.
“It will alter perceptions [for next season], but it’s probably not a bad point to start from,” he said.
“I still expect the market to get better throughout the year.”
Davison said a low start point of, say, $8.00/kg for the 2024/25 year would be positive in terms of not creating an increase in supply.
China, which in recent years has taken the lion’s share of product put up on the GDT platform, took only 33 per cent of the whole milk powder sold - the lowest market for this auction - in sequence - in the last 10 years.
“The discount between imported and locally produced whole milk powder is huge in China, so it was obvious that they would not be wanting a lot,” he said.
Despite the declines, Davison said there were positives.
“Even though skim milk powder dialled off more than expected, European prices were impacted more than New Zealand prices, so its reinverted the premium that we lost at the last auction,” he said.
“New Zealand skim milk powder is now at a premium, which is good.”
At today’s level, whole milk powder prices are now down 8.6 per cent from the early February peak.
“This suggests some modest downside risk to our $7.90/kg current season estimate but is more relevant for next season’s $8.40 estimate, should these weaker trends persist,” Westpac said in a commentary.
“Interestingly, support from the three main regions that usually pick up the bulk of product in the auctions was weaker this time.
“Chinese buyers pulled back further as did Middle Eastern buyers a touch,” the bank said.
“In contrast to the weaker auctions last year, this time we saw regions that don’t usually feature in the top three purchasers have to pick up the slack in the auction – which presumably contributed to the weak result,” it said.
Dairy NZ’s breakeven milk price is the milk sale price per kilogram of milksolids to cover the farm’s costs in a season, excluding capital expenditure and principal repaid on loans.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
