Fonterra shaves 50c off forecast milk price
Fonterra has dropped its forecast milk price mid-point by 50c as a surge in global milk production is putting downward pressure on commodity prices.
The whole milk powder index was down 0.8% with an average price of US$1971/MT.
ASB's rural economist Nathan Penny says the fall may reflect a similar recent price reversal in other commodity markets such as oil.
Yesterday's European Union support measures may have also led to buyers taking a step back.
Penny says ASB is maintaining its 2015/16 and 2016/17 milk price forecasts at $3.90/kgMS and $6/kgMS, respectively.
He says the GDT fall was across most products, with six of the seven the bank monitors posting price declines.
"Moreover, the dip contrasted with our expectations of a modest rise. Based on yesterday's futures prices, we had expected an overall rise in the 1%-5% range, and for a 7% rise for WMP.
"WMP fell a touch, posting a 0.8% decrease. Anhydrous Milk Fat, Butter Milk Powder and cheese all posted circa 6% drops, while SMP and butter were down close to the overall fall."
Penny says the price dip follows weaker commodity prices. For example, overnight Brent oil futures lost further ground taking prices back to around $38 per barrel, after ending last week above $40.
In addition, yesterday's EU farmer support announcements may have further muddied the dairy price waters. While the jury is out announcements' impact on prices, buyers are likely to have taken a step back to see how they play out in markets. Indeed, the price falls for near-term contracts against the rises for some longer-term contracts, is consistent with this approach from buyers."
Key GDT results were:
AMF index down 6.5%, average price US$3,014/MT; Butter index down 2.8%, average price US$2,733/MT; BMP index up 6.4%, average price US$1,545/MT;
Ched index down 5.6%, average price US$2,441/MT; LAC index up 0.8%, average price US$624/MT; RenCas index down 7.0%, average price US$4,083/MT; SMP index down 2.5%, average price US$1,731/MT;
WMP index down 0.8%, average price US$1,971/MT
