Tuesday, 11 November 2014 00:00

Mixed-bag dairy auction – economist

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LAST WEEK’S dairy auction result was a mixed bag for farmers, says ASB economist Nathan Penny.

 He notes that prices fell in all categories except whole milk powder, which rose 1.6% compared to the previous auction.

 “The WMP price increase is good given that it is important for our exports and milk price calculations,” Penny told Dairy News.

“It seems WMP prices are showing signs of bottoming out, but cheese, butter and other products are yet to do the same. So, it’s a bob each way for farmers.”

But farmers will breathe a sigh of relief as there hasn’t been another “chunky fall” in prices.

The average price at Fonterra’s Global Dairy Auction rose 0.3% or US$9 to US$2649/t; the volume traded fell by at least 5000t to 45,499t.

The key WMP price rose to just over US$2500. Fonterra has said the price needs to rise to about US$3500 by March next year if it is to maintain its forecast payout to farmers of $5.30/kgMS.

Penny believes there is still downward risk to Fonterra’s forecast payout. 

“The prices have to start coming back but right now we are not seeing too many signs. While the dollar is playing ball, it also needs to drop.”

Fonterra will hold its annual meeting in Palmerston North this week where the board is expected to give an update on the forecast payout.

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