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.
Dairy prices on Global Dairy Trade (GDT) are correcting faster than anticipated.
However, there is strong demand for Fonterra products outside the GDT platform and this could prop up a strong milk price forecast this season.
In May, Fonterra opened with a forecast milk price range of $7.25 to $8.75/kgMS, with a midpoint of $8/kgMS. The co-operative is expected to provide an update to its forecast later this month.
ASB economist Nat Keall says the bank is sticking to its forecast of $7.90/kgMS but acknowledges uncertainty remains high.
"There should be some downside risk to that figure going purely off the auction results, but we simply don't know exactly what kind of prices Fonterra is seeing outside of the auction platform," he says.
"The co-op is sticking to a wide forecast range for this stage in the season, so it's hard to get a signal there.
"The massive reduction in offer volumes does suggest there's a ring of truth to the co-op's comments about strong demand outside the platform, rather than just spin."
Keall says even a result towards the bottom end of Fonterras range would represent a strong season for farmers.
Over the past two auctions, Fonterra has lowered WMP offer volumes by about 40,000 tonnes, reportedly in response to strong demand off-auction.
Whole milk powder - the key driver of the farmgate milk price - fell for a fifth consecutive auction last week, down 3.8% to US$3,598/metric tonne.
Jarden head of derivatives Mike McIntyre notes that since the 15% increase in the early March 2021 auction, a series of incrementa falls has all but eroded the rise seen in early autumn.
He says removing volumes ahead of an auction would typically be supportive of price, however, the subsequent GDT result fell.
"We are now within $10 of wiping off all the good work done in the early March auction," he says.
McIntyre says support from the all-important Chinese market was more in line with longer run historical averages than the lofty heights achieved in the previous 15 months. However, he notes it’s still early days from a collection standpoint and he sees the next three to four auctions as key in deciding just how successful this season is likely to play out from a milk price perspective.
New Zealand First leader and Foreign Minister Winston Peters is ratcheting up pressure on Fonterra farmers as they vote on divesting the co-operative’s consumer and related businesses.
Alliance Group's Pure South Handpicked 55 Day Aged Beef has been recognised on the world stage, securing top honours at the World Steak Challenge in the Netherlands.
Meat co-operative, Alliance has met with a group of farmer shareholders, who oppose the sale of a controlling stake in the co-op to Irish company Dawn Meats.
Rollovers of quad bikes or ATVs towing calf milk trailers have typically prompted a Safety Alert from Safer Farms, the industry-led organisation dedicated to fostering a safer farming culture across New Zealand.
The Government has announced it has invested $8 million in lower methane dairy genetics research.
A group of Kiwi farmers are urging Alliance farmer-shareholders to vote against a deal that would see the red meat co-operative sell approximately $270 million in shares to Ireland's Dawn Meats.
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