April 13, 2011

Global dairy prices continue to drop

Whole milk powder (WMP) prices have taken a surprising dive over last week, but the spot market hasn't fallen as far as prices seen at the latest globalDairyTrade auction.

The average auction contract 1 WMP price was US$3,984, but the results of the weekly Agrifax survey put the spot price around US$200 above that. Contrastingly, the average auction contract 1 skim-milk powder (SMP) price, at US$3,980, was around US$200 above the spot market price.

Global dairy commodity prices have continued their general fall, and milk powder spot prices are now around the same levels as in early February. In recent weeks Oceanic-sourced SMP has been selling at a premium of around US$100-$200 per tonne over returns being achieved in Europe.

Prices for fat-based products have been much more stable than powders in recent months but the latest values of butter and anhydrous milk fat show a slight easing.

The New Zealand cow slaughter has been following the seasonal trend, with the dairy cow cull well under way in the North Island and South Island numbers continuing to build momentum. This means large volumes of manufacturing beef are being produced, much of which heads to the US. Prices for US imported 90CL manufacturing cow meat eased slightly over the past week to US$2.01/lb, still 50% greater than the five-year average for this time. With prices so high, many small US buyers and traders have been struggling to purchase large volume.

This has left the lions share to the larger, more liquid buyers.

The rising kiwi has halted any potential lift in meat company prices this week. However, manufacturing cow prices are now very close to 400c/kg in both islands.