meta In October of 2022, dairy commodity markets fell further. :: The Bullvine - The Dairy Information You Want To Know When You Need It

In October of 2022, dairy commodity markets fell further.


Dairy

In October of 2022, dairy commodity markets fell further.

Spot prices throughout the dairy industry dropped by nearly double digits. Investors are getting increasingly anxious as they try to predict the future of consumer demand.

The current trend in prices is driven largely by the fact that Chinese buyers are not actively buying imports.

As of September 2022, New Zealand’s milk production had dropped back to 3.2% YOY, continuing a trend that began in the previous season. Year-on-year, seasonal supply is down 3.7% so far.

A lacklustre spring has impacted production in most regions. By the time peak flows occurred in late October, production may have been recouped in part.

Beef

The final tally for the 2022 season’s processing has been tallied. A total of 5.2% fewer cattle were processed this season compared to the 2020-21 period, with reductions across the board but especially noticeable in the numbers of prime beef, cows, and bulls.

In 2022, it was predicted that both the number of cattle slaughtered for beef and the number of female cattle slaughtered for meat would be about 1.5% and 5% lower year over year, respectively. Slaughter rates had been rising steadily since 2021, when they hit a peak due to rising bobby calf retention in 2019. There were about 69,000 fewer cows slaughtered in comparison to the previous year. This is likely because farmers were encouraged to keep more dairy cows by the high milk price.

Additionally, there was a 3% decrease from 2021 to 2022 in the number of bobby calves processed during the spring of 2022 (July, August, and September). Dairy farmers who supply Fonterra have been preparing for the implementation of zero on-farm euthanasia of bobby calves beginning in 2023, prompting the meat industry to anticipate an increase in the number of bobby calves presented for processing.
Sheepmeat

The price of South Island lamb reached its all-time high in September and has since steadily declined, reaching NZ$ 9.25/kg cwt by the end of October. Although the current price of lamb is still above average, it has dropped below the projection for the same period in 2021 (by NZc 15/kg cwt).

About 560,000 lambs were slaughtered in 2022, down 3.1% from the previous season.

New Zealand’s key lamb markets, including China, Europe, and the United States, are experiencing economic instability, which is affecting both demand and export earnings.
Fertiliser

Reduced natural gas prices restored manufacturers’ profitability, resulting in a drop from 67% to 37% for nitrogen plant curtailments across Europe.

This adds about 4 million tonnes of urea per year to the supply chain, which is a 45% increase in site numbers since the energy price increase in 2022. Prices around the world are starting to reflect this new reality, though in some areas, the effects have been muted. Spot prices for urea in the Baltic Sea decreased by 3% MOM in October, going from NZ$ 940 to 1,030/tonne to NZ$ 910 to NZ$ 1,000/tonne.
Quote for Exchange

By the end of October, the New Zealand dollar had recovered slightly from its year-low level of US$ 0.55, trading between US$ 0.55 and US$ 0.58.

The US dollar is expected to remain strong in the near future as investors prepare for the Federal Reserve to raise interest rates by another hawkish 75 basis points.

The New Zealand dollar’s correlation with commodity prices suggests further downside in NZ$/US$ despite forecasts for further RBNZ rate hikes.

In a year, we anticipate a reversal in the US dollar’s strength that will allow the NZD/USD exchange rate to recover to 0.62.


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