Is the Global Dairy Trade starting to stabilise?

Overall dairy prices dipped 1.3% at this weeks Global Dairy Trade auction for the seventh consecutive price fall.

Overall prices continue to be at their lowest since mid-2009 and sit nearly 40% below a year ago.

However, looking at the auction by product, the result was more mixed, according to New Zealand bank ASB.

It says price rises actually shaded price falls by four to three. Moreover, the overall fall was dominated by an 8.9% fall in Anhydrous Milk Fat, the bank says.

Meanwhile, it highlights that milk powder prices were essentially flat at the most recent auction auction.

WMP auction volumes were at their seasonal low in this auction, and down circa 30% from the previous auction. In this respect, the flat WMP result was disappointing, it says.

However the other four products fared better, according to ASB.

Butter milk powder recorded a 10% increase more than reversing its large fall at the previous auction. While cheddar continued its recent strong run, while butter and casein rebounded a little after last auction’s falls.

Looking by contract, ASB says WMP prices were largely flat over all contracts, with the exception of contract 6.

It puts this down markets being well-supplied given the New Zealand production season ended with a late production flourish.

“We now expect that New Zealand production ended the season 3.5% higher than the 2013/14 season – this is the third lift in our forecast over recent months,” it says.

According to ASB, markets will take a few more months to clear this extra (unexpected) production.

But next season the New Zealand production clock resets, it says. “With record cow slaughter over recent months and the low forecast milk price, we expect a weaker production season ahead.”

ASB says with less milk hitting markets over the coming season, we expect dairy auction prices to lift later in the year.

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