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Whole milk powder price up 3.6% in Fonterra internet auction (Update 1)
December 2nd, 2009The average whole milk powder price at Fonterra’s latest internet auction rose 3.6% to US$3,560/tonne overnight from a month ago. The average price is now up 95% from its low in July. (Update 1 includes Fonterra statement.)
Fonterra’s globalDairyTrade manager Paul Grave said the market continued to be underpinned by tight supply conditions. Grave said while the outlook for whole milk powder prices remained positive, Fonterra is expecting more volatility in supply and demand responses to the 95% increase since July.
Here is the full release from Fonterra this morning:
globalDairyTrade, Fonterra’s internet-based sales platform, concluded its December trading event this morning (NZT) with the average price for Whole Milk Powder up 3.6%.
The trading manager, CRA International, advised Fonterra that the average price achieved across all contracts and contract periods for Whole Milk Powder (WMP) was US$3,560 per tonne FAS. This was US$123 per tonne higher than the November event. Prices ranged from US$3,370 per tonne FAS to US$3,760 per tonne FAS.
Paul Grave, globalDairyTrade manager, said the market continued to be underpinned by tight supply conditions.
“However, the economic outlook is still relatively fragile. A sustained recovery is reliant on strong consumer demand,” Mr Grave said.
“WMP prices have risen by 95% since July. While the outlook remains positive, we expect more volatility as a result of supply and demand responses to this large price increase.”
For Anhydrous Milk Fat (AMF), the average price achieved across all contracts and contract periods was US$4,349 per tonne FAS. Mr Grave said AMF pricing had come off slightly from historic highs.
Overall pricing increased 1.9% across both AMF and WMP.
The next globalDairyTrade trading event will be held on January 5, 2010.
Tags: Fonterra, internet auction, Paul Grave, Whole Milk Powder
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December 2nd, 2009 at 7:24 am
Never count out a dairy farmer. 95% since july, wow. Many will be in clover, many still so deep in poos but this will enable them to survive for another year. Pity the graziers who agreed to give away their weaner and yearling grazing so cheaply when things looked grim. Pity the manufacturing and other export sectors as the dollar flies with this news. We are a one trick pony now, good or bad.
Its an interesting ride, will the competing american and european dairy farmers chuck enormous amounts of grain at their girls and immediately pump up their production?
December 2nd, 2009 at 7:33 am
Farmer Will, yes they will (USA increase production) and crashing down will come the milk powder price, and payout to follow. It’s not through superior direction and managment that we shareholders are recieving such high if not volitile payouts.
December 2nd, 2009 at 8:00 am
Fantastic! another chance for dairy farmers and their financiers to get debt levels under control and mitigate lending losses.
See http://davidhillary.blogspot.com/2009/11/fonterra-payout-increase-buys-time-for.html for more on how this will help the likes of South Canterbury Finance.
December 2nd, 2009 at 8:00 am
It seems we are in very difficult times Int Farmer, I farm beef, which is an unmitigated disaster. And it gets worse with each great announcement from Fonterra! However I sold up most of my stock last season and took on dairy graziers. I was bold enough to demand a high figure despite the shocking outlook. Thankfully I did. I have been caught out before giving away grazing too cheaply.
Its certainly not through superior direction and management the sheep and beef meat companies survive either. They are currently mining the equity of the sheep and beef farmer. This will not proceed much longer as there is little equity left.
December 2nd, 2009 at 9:18 am
I think it is time for a small dose of reality.
1. The auction prices achieved for WMP were in the bottom half of the spot price range over the last 2-3 weeks. This auction does not signal rising prices but a movement sideways. From here they may start to rise again, or more likely ease.
2. AMF was down 8.5%.
3. Average dairy export prices in October (a high volume export month) only made about 60% of current spot prices (spot and auction prices are closely aligned). Extrapolating the highly visible auction prices into payout while ignoring the bulk of export sales will lead to disappointment.