The Global Dairy Trade auction index in New Zealand turned back to the negative side, largely reversing a previous lift, and dragged down by rising supply. Sliding for the fifth time in the past six auctions amid an increase of volume on offer. , the lone product that didn’t trade softer was sweet whey powder as it wasn’t offered for trade. Products to note included butter falling 5.5% to $1.8425 per lb., cheddar declined 2% to $1.74 per lb, skim milk powder dropped 1.6% to $1.125 while whole milk powder closed at $1.3775, down 1.7% for the session. Three other products took hard falls in lactose losing 11% of value, anhydrous milk fat 5.1% and butter milk powder dropped 5.6%.
“This is fairly normal at this time of year as NZ milk supplies start to come online,” said Robert Gibson, dairy analyst at NZX.
Demand was particularly strong from North Asia. However analysts warned that the trade conflict between the United States and China was likely to weigh on the Chinese currency, posing a risk to dairy prices for the rest of the year.
“We have warned that Chinese demand is a key swing factor in the outlook for dairy prices over the coming year….recent developments suggest the outlook for Chinese consumer demand and global growth has deteriorated,” said Anne Boniface, senior economist at Westpac Bank.
The auction results can affect the New Zealand dollar as the dairy sector generates more than 7% of the nation’s gross domestic product.
The currency fell overnight from around $0.6550 to around $0.6525.
GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.
The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.