Farm Ireland

Monday 11 December 2017

Global Dairy Trade auction slumps by 3% as Kiwi milk production recovers

Ciaran Moran

Ciaran Moran

Today's Global Dairy Trade (GDT) auction concluded with prices down 3.2%.

The news comes following reports from Fonterra that New Zealand milk supplies may not be as low as forecast this season.

Notable from today’s GDT auction is that Skimmed Milk Powder prices were 3.8pc lower, while Whole Milk Powder Prices fell by 3.7pc.

Key Results

  • AMF index down 1.3%, average price US$5,693/MT
  • Butter index up 0.2%, average price US$4,598/MT
  • BMP index down 12.9%, average price US$2,090/MT
  • Ched index down 5.3%, average price US$3,590/MT
  • LAC index up 6.8%, average price US$966/MT
  • RenCas index down 5.8%, average price US$6,135/MT
  • SMP index down 3.8%, average price US$2,574/MT
  • WMP index down 3.7%, average price US$3,189/MT

Fonterra New Zealand milk collections have shown signs of recovery following unfavourable weather conditions throughout the peak months, according to a recent update by the company.

This has meant season‑to‑date volumes have remained 5% behind last season. The revision factors in drought conditions in Northland.

Fonterra has revised the forecast milk collection for the 2016/17 season to be down 5% on last season from the previous forecast decline of 7%.

Fonterra’s milk collection across New Zealand for the eight months to January 31 reached 1,053m kgMS, 54m kgMS lower than last season.

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In January, it says collections reached 173 million kgMS, 1% behind the same month last season.

IFA National Dairy Chairman Sean O’Leary said the 3.2% fall in today’s GDT auction, which traded product for the months of March to August 2017, reflects buyers’ speculation egged by the slightly less negative revised New Zealand 2016/17 milk output forecast (-5% instead of -7%). 

He said with EU dairy returns continuing into mid-February around 37c/l gross (before processing costs), co-ops can and must remain on track to deliver 33c/l incl VAT (31.3c/l + VAT) before peak.

“Dairy farmers have had a very difficult year with cash flow stresses from late 2015, which persist on many farms to this day, and are only now starting to get relief as prices lift above costs and milk volumes start to build.  The strong demand for the low cost cash flow loans lobbied for by IFA is a testimony to this,” O’Leary said.

“Most co-ops have been increasing milk prices by at least 1c/l each month since July, so that January milk prices have reached around 29.5c/l + 5.4% VAT,” he added. 

“With mid-February EU market returns stable and comparable to December and January levels of around 37c/l before processing costs, equivalent to a farmgate milk price of 32c/l + VAT, co-ops can and must continue with those progressive milk price increases to reach at least 33c/l for March milk,” Sean O’Leary concluded.

Online Editors