Milk prices got off to a disappointing start, as whole milk powder prices at the GlobalDairyTrade auction slumped.
The GlobalDairyTrade index, which is based on the auction run by the giant New Zealand milk cooperative Fonterra, fell by 3.9% compared to the last event held two weeks ago.
And prices for benchmark whole milk powder were down 7.7%, at an average of $3,294 a tonne.
But cheddar prices extended gains, up 1.4% over the last fortnight, to $3,894, the highest level since July 2014.
Falling New Zealand output
Whole milk powder prices at the auction are still up 49% year-on-year, reflecting a tighter world market, particularly in New Zealand, the world’s top exporter.
In December Fonterra forecast its own milk collections, which comprise the majority of New Zealand, at 1,460m kilogrammes of milk solids, down some 7% year-on-year.
The co-operative saw the reduction “reflecting very challenging conditions across most parts of the country”.
“With season to date milk collection and peak milk volumes significantly impacted we expect these lower volumes to flow through the balance of the 2016-17 season,” Fonterra said.
Chinese window-buying dries up
Part of the weakness is due to the fact that buying for the Chinese tax-free import window is done for the year.
The Chinese government allows tariff-free dairy imports in Januarys, driving strength in the nearby-contract over recent auctions.
But the trend for Chinese imports is upward, thanks to reduced stocks there.
Over the 12 months to October, Chinese dairy imports were up 26% year-on-year, with whole milk powder imports up 17%.