Milk price volatility in auctions

Milk volatility looks set to continue, as the Global Dairy Trade reported a fourth consecutive drop in dairy prices.

The Global Dairy Trade price index, which is owned by Fonterra, reported a drop of 8.9% on April 1. As a result of the weaker prices, the New Zealand dollar dropped.

According to TJ Flanagan, ICOS,  it’s too early to speculate on the impact of the 8.9% drop (from a trade-weighted index of 80.38 to 80.94). However, he said it’s a clear indication that volatility, as speculated, is here to stay. “Its a little early to tell what impact this will have at ground level, but it’s the fourth drop in a row and the most significant drop. “We knew that volatility was going to be an issue and everyone has said volatility will continue. Everyone has predicted milk volatility is there, it was inevitable it was going to drop again.

“It’s a supply and demand issue, but the impact on the ground will depend on the contracts the IDB and others have in place.” New contracts and those signed over the last few months may reflect a general weakness.

The Global Dairy Trade is a bi-monthly auction platform, owned by Fonterra, for internationally traded commodity dairy products. It attracts bidders from more than 90 countries.

Meanwhile, Ireland’s milk intake was down 4.4% in February, according to the latest figures from the CSO. According to the CSO, domestic milk intake by creameries and pasteurisers was estimated at 213.2 million litres for February 2014. This was 4.4% below the corresponding 2013 figure.

Comparing the February 2014 milk produce figures with those for February 2013 shows that total milk sold for human consumption decreased by 9.7% to 33.6 million litres, while butter production was down 6.3% to 5,900 tonnes.

 

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