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Global dairy prices rise in overnight auction as volumes decline


Breaking News ScreenA rise in global dairy prices reported on Wednesday offers tentative evidence they may have bottomed out, but any recovery is seen being gradual and will unlikely offer immediate relief to farmers angry about cuts to farmgate prices.

The fortnightly Global Dairy Trade auction showed prices had climbed 2.6 percent to an average selling price of $2,283 per tonne, although that came on the back of low offer volumes. The index had fallen 1.4 percent in the previous auction.

New Zealand and Australia dairy farmers have been hit hard by dairy prices that have plunged nearly 60 percent since early 2014, dragged down by swelling global supply.

An estimated 85 percent of dairy farmers in New Zealand are operating at below break-even levels, while in Australia there has been outcry from farmers after New Zealand dairy co-operative Fonterra and the listed arm of Australia’s biggest milk processor Murray Goulburn cut farm gate prices by up to 15 percent in the past few weeks.

Analysts noted that much of Wednesday’s rise came from volumes dropping 12.1 percent to 18,113 tonnes.

“The GDT result last night was positive with the market now heading in the right direction, but the result was off low volumes,” said AgriHQ dairy analyst Susan Kilsby in a research note. She said the amount of whole milk powder on offer – the main product in the auction – was the lowest in more than three years.

“Hopefully the market can sustain this positive direction as offer volumes start to increase in the coming months,” she added.

ASB Rural Economist Nathan Penny said the improving global prices didn’t change the outlook for the milk market. Fonterra is expected to announce its forecast payout for its 10,500 New Zealand farmer shareholders at month-end.

Four economists polled by Reuters expect Fonterra to pay its farmers between NZ$4.50-NZ$5.00 per kilo of milk solids in the 2016/17 season, up from the previous season’s NZ$3.90 per kilo.

“The volumes at this auction were very low and hence make little difference to either this or next season’s milk price,” said ASB Bank Rural Economist Nathan Penny.

Fonterra, which controls around a third of the world’s dairy trade, said on Monday that its milk collection for last season had dropped 3 percent.

The Global Dairy Trade auctions, which were set up by Fonterra and operated by trading manager CRA International, are held twice a month, with the next one scheduled for June 1.

Source: Reuters


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