July 14, 2010

NZ dairy prices slide as supply rebounds

 
Fonterra has revealed that prices were down sharply at its latest auction, as concerns about supply, which had fuelled recent price increases, eased.

The New Zealand-based dairy processor said average prices for anhydrous milk fat, skim milk powder and whole milk powder fell 13.7% across all contracts and contract periods after its latest globalDairyTrade trading event.

Paul Grave, globalDairyTrade manager, said the result reflected supply increasing globally in response to what has been a very strong price signal over recent months. Concerns in the market about short term product availability, which to a large extent underpinned recent high prices, appear to have eased.

Analysts said the news from Fonterra gives a rough idea of a global trend whereby the market is moving from a situation of excess demand to one where supply is recovering. However, the price slump is to a large extent particular to New Zealand because the country is moving into the peak production period.

In Europe, the analyst said the market remains firm although production is starting to increase slightly in France and Germany. As for the direct impact of the price and supply situation in New Zealand, experts said it may increase competition on international markets and put pressure on European exports of dry powders.

At present, EU and world prices appear to be stabilising for most commodities despite the seasonal increase in EU and US milk production.