Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
The country's second-largest milk processor says it isn’t surprised at the big drop in whole milk powder prices at the last Global Dairy Trade (GDT) auction.
Open Country Dairy (OCD) chief executive Steve Koekemoer says the 7.5% drop in WMP price was “somewhat expected”.
At the GDT auction on August 4, the price of Fonterra’s flagship offering suffered its largest decline in more than three years.
WMP prices sit at US$3,003/metric tonne – around 6% below the pre-Covid level in January.
In his monthly message to OCD farmer suppliers, Koekemoer says the price dip was somewhat expected after the double-digit increase last month and with additional volume now on offer.
“I am also assuming that some customers will be holding back to see how the NZ season ramps up and to assess the supply side over our peak,” he says.
“We see this price drop as a predictable correction and anticipate pricing to maintain around current levels with some movement either way over the season.”
However Covid-19 looms large over future dairy prices.
“The greatest unknown is any potential impact from a further disruption in the supply chain through Covid,” he says.
“Although supply and demand are currently balanced, we have seen how the market can shift when the foodservice sector shuts down.”
While analysts have described the WMP price dip as tough and disappointing, for the time being they are sticking to their forecast payouts for 2020-21 of between $6.50 to $6.75/kgMS. Fonterra’s revised forecast price range is $5.90 to $6.90/kgMS.
OCD has a different milk payment. It has finalised the May Settlement Period price at an average of $7.04/kgMS.
Koekemoer says it is pleased that the price is within the forecast range set some time ago.
“It was a challenge to forecast the pricing for the earlier calendar months of 2020, but the sales team have done extremely well to extract as much value as possible from the market.
“We have also reviewed our forecast going forward and adjusted the settlement periods upwards.”
OCD’s board and management recently completed another round of farmer meetings.
Koekemoer says OCD factories are starting to ramp up with milk coming into the sites and the team is “ready and excited to deliver another record season”.
“Our review of last season’s performance shows exceptional results and you can be assured that your milk is in very good hands.”
NZPork has appointed Auckland-based Paul Bucknell as its new chair.
The Government claims to have delivered on its election promise to protect productive farmland from emissions trading scheme (ETS) but red meat farmers aren’t happy.
Foot and Mouth Disease outbreaks could have a detrimental impact on any country's rural sector, as seen in the United Kingdom's 2000 outbreak that saw the compulsory slaughter of over six million animals.
The Ministry for the Environment is joining as a national award sponsor in the Ballance Farm Environment Awards (BFEA from next year).
Kiwis are wasting less of their food than they were two years ago, and this has been enough to push New Zealand’s total household food waste bill lower, the 2025 Rabobank KiwiHarvest Food Waste survey has found.
OPINION: Sir Lockwood Smith has clearly and succinctly defined what academic freedom is all about, the boundaries around it and the responsibility that goes with this privilege.
OPINION: Should cows in NZ be microchipped?
OPINION: Legislation being drafted to bring back the controversial trade of live animal exports by sea is getting stuck in the…