Prices fall by 5% at Fonterra auction

By on March 19, 2014
Dairy

Average prices paid at yesterday’s Fonterra auction fell by 5.2 per cent, compared with those recorded at the event held on 4 March. Whole milk powders and skimmed milk powders were amongst the products affected by the change in market conditions, with price falls of 5.8 per cent and 4.6 per cent registered respectively.

According to DairyCo, however, world dairy product stocks continue to be replenished as milk production carries on performing well, although it has been reported that the majority of stocks being produced are already committed leaving spot product tight.

Over the past month, EU butter prices dropped below US$5,000/tonne for the first time since March 2013. EU prices continued the decline seen so far in 2014 although they appeared to have levelled off to a certain degree as they have aligned with world price levels. A 7.2 per cent reduction to $4,988/tonne brought the EU butter price to within US$269/tonne of the Oceania price although it remains US$949/tonne above the US price.

US butter prices meanwhile increased 11.2 per cent to $4,039/tonne between January and February, the highest price recorded since November 2012. A competitive price on international markets and domestic commitment of stocks drove up prices over most of February. There are suggestions however that this upward price pressure has dampened somewhat in the latter weeks.

Oceania butter prices also increased over the month, rising US$200/tonne to US$4,719/tonne. This is the highest Oceania prices since £4,800 was achieved in June 2011. Most production is reported to be committed keeping spot availability tight. Export demand remains strong placing upward pressure on prices.

Strong international demand supported Skimmed Milk Powder (SMP) prices through February. Average prices increased by 1.2 per cent over the month to US$4,729/tonne. The US price increased 2.2 per cent to US$4,582/tonne whereas the EU and Oceania prices both increased by 0.8 per cent (US$4,619/tonne and US$4,988/tonne respectively).

Average prices for Whole Milk Powder (WMP) eased slightly over the month, falling by US$12/tonne to US$4,983/tonne. Both the EU (US$5,125/tonne) and Oceania (US$5,113/tonne) WMP prices saw decreases (1.1 per cent and 0.6 per cent respectively) while the US price increased to US$4,711/tonne (1.1 per cent) due to tighter stocks. With strong Chinese buying in January there is an indication that their demand for powders may have slowed.

Cheddar prices in both the US and Oceania increased significantly over the past month. US prices increased by 9.7 per cent to US$5,041/tonne between January and February, the highest US price on our records. The indication is that prices softened towards the end of February as stocks began to increase and high prices begin to reduce demand slightly.

Oceania Cheddar prices also breached the $5,000 mark with prices reaching US$5,225/tonne (a 6.6 per cent increase on the month); August 2008 was the last time this occurred. Interest from South Korea, Japan and Russia helped boost prices.

 

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