Dairy prices fall 7.3%, milk powders down 10% in latest Fonterra auction as they give up some of the gains over the past few months

Dairy prices fall 7.3%, milk powders down 10% in latest Fonterra auction as they give up some of the gains over the past few months

The latest globaldairytrade auction has seen prices fall 8.1% in NZ dollar terms from the previous auction on April 17, a 7.3% fall in US dollar terms.

The sharpest falls were for milk powders.

Wholemilk powders were down 10.2%, skimmilk powders were down 9.5% from the previous auction.

These retracements only take overall prices back to where they were in late March 2013.

This snaps a run of nine straight auctions where prices rose. The correction was not unexpected.

The GDT-TWI is now 1,580 compared with 894 at the same time a year ago, and represents a 77% gain over that time, despite today's fall.

The index peaked at 1,704 at the April 16, 2013 auction.

Anhydous milk fats fell 5.2% from the prior auction but are still up 70% from a year ago.

Butter fell 6.7% from the previous auction. It was not offered a year ago.

Cheddar cheese was up 3.4% from the prior auction, and up 72% from a year ago.

Rennett casein fell 3.1% from the prior auction, but is still up 74% from a year ago.

Total volumes sold in this auction were 17,237 tonnes, and this was only about half of the volumes sold in the auction at the same time a year ago, although it was 14% more than in the mid April 2013 auction.

Todays auction comes after it was announced that India's largest dairy co-operative GCMMF has joined the globaldairytrade auction platform.

"Amul" is India’s largest dairy and food brand. Amul's cooperative model pioneered India's White Revolution that helped India become the largest producer of milk in the world. Amul range of products are marketed by Gujarat Co-operative Milk Marketing Federation.

GCMMF has 3.2 million milk producers affiliated to 50 cooperative dairy plants with a total milk handling capacity of 20 million liters per day. The total milk drying capacity is 600 MT per day. GCMMF's annual sales turnover in 2012-13 was US$ 2.5 billion. GCMMF is also the largest exporter of dairy products from India.

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13 Comments

What's a voilume David C..?...what's a trainspotter Christov.....?
Understatment of the year so far...the correction was not unexpected....well then if volumes were part of the correction process ,there should be a massive pile in the Hedge somewhere just bursting to carry forward.
 A merry dance....!

David has missed a couple of points:
 
1. Bidders simply didn't turn up - only 17% of eligible participated. Only 135 this auction when 2 months ago 200 were participating.
 
2. Prices for future delivery are much lower than for near term. So something like Contract 4 WMP fell 24% - from $6,000 to $4,600. That is partly because Contract 4 last auction was for August delivery, but this time September delivery.
 

3. Action in the share/unit price.
The Fonterra unit price on the NZX yesterday jumped 2.69 per cent to $8.02
Fonterra was having a very good run, Lister said. At the beginning of the week the share price was $7.05. "It's rivalling Xero."
This comment was made on Wednesday night - Mr Lister is a bit mixed up shares were $7.05 on 22 nd of April 2013 - so its a week and a half - 8 trading days..
http://www.stuff.co.nz/business/farming/dairy/8621560/Job-cuts-please-Fo...
 

From your link:
In March, Fonterra posted a 32 per cent gain in first-half profit to $449m
 
If I recall correctly, the majority of which were FX gains.

Units in the Fonterra Fund topped $8 on Wednesday, having floated at $5.50 a mere five months ago. The immediate catalyst for the fund's latest surge - it was trading at $7.05 only 10 days earlier - is not clear. Fonterra itself has made no obvious price sensitive announcements over the period, save for a plan to axe up to 300 jobs.
Fund manager Andrew Bascand, of Harbour Asset Management, said there was general enthusiasm for quality New Zealand and Australian stocks.
"There is a lot of cash looking for a home around the world . . . many companies touched new share price highs in April. Investor interest in equities seems unlikely to wane soon."
 
http://www.stuff.co.nz/business/farming/dairy/8629027/Huge-potential-in-...
 
any thoughts?
 

I don't think I should say too much until I have spent time analysing Fonterra's annual report for this season. I suspect I won't be the only one taking a close look.
 
Fonterra puts a lot of effort into perception management and does it better than anyone else in N.Z. That suggests to me that if/when Fonterra's share price corrects then it may be sharp, and come as a surprise.
 
A2 I like. It will be interesting to see what sort of premium A2 infant formula establishes over NZ sourced A1 formula.
 
Fonterra has a disgraceful record regards A2 milk which they originally identified and patented. That NZ is still exporting A1 infant formula should be an embarassment to our dairy industry. I think that reflects poorly on dairy industry leadership, and central government as well.  

Holy cow Tonto, look out here come the Indians, we better take cover..!
What you mean .."we" paleface..?

Flogged this comment from trhe trademe Community board, has Fonterra got problems coming?
 
$8.00 a share just a little bit more and I am out of this dairy business. Going to hold off fencing my streams as may not need to do it. Mate down road told them not to bother coming next season as he wasnt fencing his streams, wonder how many suppliers they will lose.
fatrata (69
Highest ever share price yesterday and 300 jobs cut saving 65 million for now and you can gamble with your milk price if you like when they know the price and you don't. Numbers manipulated the whole time to play games with suppliers and other companies. They have the monopoly to stop anyone not having to put up with there games. Just as well they work for the farmers isn't it.

ash4561 (3 )  9:19 am, Thu 2 May #2

 

Imagine if you will A.J. a countryside swarming with coolie hats busy repatriating  profits to the Mainland at both ends of the Chain......
 for now and you can gamble with your milk price if you like when they know the price and you don't. Numbers manipulated the whole time to play games with suppliers and other companies. 
The hedge is fraught with things that bite chunks out of your ass when you least expect it.

doan choo wurry none or should that be start wurryin' now
Crafar owner now in ao-teo-rower searching for new deals
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10880975

Me worry iconoclast....? why I'm Alfred Neuman incarnate....it's a mad mad world out there, an I'm just trying to fit in......
yes I did see the article...but I saw the potential long before...Oh I Oh I O.

Almost every other day I comment on the strong currency which is gutting exporters of manufactured goods ..... now its starting to hurt the primary commodity sector.
Our econimic fundamentals , while improving,  have not changed enough to justify the stroong KIWI $ ...... simply , the NZ Dollar has to weaken   

If milk powder is having a normal correction then the Kiwi will be due for a pull back, but this may not happen until the last quarter of 2013, but mainly against the US dollar.  The British pound and Euro still have more weakness on cards against the kiwi.

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