Milk powder prices surge 5.9%

Milk powder prices up 5.9% to record high since globalDairyTrade started auctions; prices now at January 2008 levels

Rural News

Milk powder prices up 5.9% to record high since globalDairyTrade started auctions; prices now at January 2008 levels

2nd Mar 11, 8:11am by Bernard Hickey

<p> Fonterra is forecasting a record payout for the current season of up to NZ$7.80/kg after retentions. It increased the forecast last week by 60c/kg.</p>

Results from the overnight auction of wholesale milk powder on Fonterra's globalDairyTrade internet platform showed prices rose 5.9% since the last auction two weeks ago.

See the full results here.

The globalDairyTrade Trade Weighted Index of prices across various types of milk powders and fats shows prices at record highs since the auctions started in July 2008.

However, the Index has reconstructed prices from trading off the platform and it shows prices at their highest levels since January 2008. Prices remain around 12% below their October 2007 peak.

Fonterra is forecasting a record payout for the current season of up to NZ$7.80/kg after retentions of cash to build Fonterra's shareholder capital. The cooperative increased the forecast last week by 60c/kg.

See the full article here.

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7 Comments

by Colin Riden | 2nd Mar 11, 10:32pm 1299058339

Bernard, yes - most gDT prices are way up but how about doing some homework and providing some balance?

March 2nd 2010, gDT offerred 10,000 tonnes of Contract 1 WMP.

March 1st 2011, gDT offers 1,750 tonnes of Contract 1 WMP.

Sure, there are now auctions twice as often but even taking that into account the monthly volumes being offerred now are only one third what was being offerred a year ago, and one fifth of that from January.

Do you think that perhaps the extremely low volume on offer has had an impact on the price and that when the volumes at least triple as they must then the price may fall?

by Andrewj | 3rd Mar 11, 8:36am 1299094613

Thanks Colin, wouldnt want to run out a buy a dairy farm on the ' news ' would one. Looks like we are back to the Boom Bust cycle that a report by Cornel university thought we had entered. With every boom struggling to reach previous highs and the lows reaching new depths.

by Chuck | 3rd Mar 11, 8:21pm 1299136912

Interesting comment re the boom and bust "With every boom struggling to reach previous highs and the lows reaching new depths "

I guess you must be referring to Commodity prices, however the payout table above would seem to indicate that this isn't the case at the moment. Previous Boom was a $7.90 payout (before retentions) and this one will be $8.00 / kg MS. I guess we will wait and see on the bust scenario this time as it hasn't yet happened. However the last bust saw a payout of $5.20 which was well above pre 07/08 average payout levels.

Re buying a dairy farm at the moment, if you were doing your budgets on realistic long term average payouts and considering the low farm prices and expectation that int rates remain lower than average for some time...... Why wouldn't you??

by Colin Riden | 3rd Mar 11, 9:15pm 1299140102

"Why wouldn't you??"

a) Rising costs of production
b) Risk of capital losses as farm prices likely still have a way to fall

by ploughboy | 3rd Mar 11, 9:48am 1299098908

thanks colin

also next season supply is selling way less than this seasons

by Casual Observer | 3rd Mar 11, 10:09am 1299100173

Very valid point Colin.

Interesting comment re next season, Ploughboy.

Anyone who thinks this seasons predicted payout is sustainable has their head in the sand. When payout does come down, and it will, it will come down with a thud.

by Andrewj | 3rd Mar 11, 10:14am 1299100444

interesting CO, the banks have just taken over a dairy farm in this area, after trying to come to an agreement with the interested parties for some time. Rumor that the debt is over 15 mill and best offer so has been 8.7mil. The banks must be so overjoyed at news like yours,ploughboy's and Colins.