The Weekly Dairy Report: The market delivers another low blow at auction

The Weekly Dairy Report: The market delivers another low blow at auction

Lots of snow and heavy frosts made for a very difficult week for southern regions, as utilization of forage crops plummeted, and hay, straw, baleage and silage supplies reduced dramatically.

While in the north floods around Wanganui brought problems with road access, pasture and infrastructure damage, and in other western areas, high soil moisture levels caused pugging issues.

Farmer confidence has dropped to the lowest point in ten years, lead by the sharp reversal of fortunes for dairying, but a big farmer turn out at the nitrate management seminars is a sign that managers are prepared to educate themselves to the challenges that lie ahead.

Some indication that the dairy commodity market may be reaching the bottom were seen in the latest Oceania prices, but another test will be seen in this weeks dairy trade auction.

But hopes were dashed  last night when for the 8th event in a row the global dairy auction prices fell, led by big drops in whole milk and skim milk powders as oversupply and weak demand drove values lower still.

With the present predicted $5.25 payout dependent on whole milk powder prices recovering to $3500/tonne by Christmas, todays rate at $$2054/tonne shows a major price turn around will need to start soon to achieve this mark.

The currency has eased along with the fall to mask some of the decline, and financial analysts are suggesting another Reserve Bank driven interest rate drop maybe needed, but this will not stop global over supply and weak demand in China.

Interestingly in Australia, the Warrambool Cheese and Butter dairy company announced a payout of A$6.10 ms equivalent for the 2014/15 season, a rate all NZ farmers will look on with envy, and the new seasons price converted to NZ dollars at $6.30 will pressure NZ processors further.

Fonterra’s guaranteed milk price scheme was set at $5.25/kg/ms, and was heavily oversubscribed as farmers locked in this average return, as they decide to manage risk in this volatile market environment.

Lincoln University researchers are planning to do a survey focusing on how farmers are dealing with debt, as the capital required to run a farming business grows, and with it increasing pressure of financial commitments.

More results have been emerging from last years cows deaths on swedes, with Southland vets stating more occurred on the HT variety than unmodified cultivars and urge continuing care with feeding brassicas.

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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3 Comments

Interestingly in Australia, the Warrambool Cheese and Butter dairy company announced a payout of A$6.10 ms equivalent for the 2014/15 season, a rate all NZ farmers will look on with envy, and the new seasons price converted to NZ dollars at $6.30 will pressure NZ processors further.

if the bookish needed a jolt, that faith based/dogma economic models may not deliver when cast against the human condition...

Thank you Tim All in all, the underlying theory of comparative advantage is generally considered the most widely shared foundation theory in economics. In one recent survey I read, it was described as “an unassailable intellectual cornerstone”. For those like me who were educated in economics in the 1960s and 1970s, the man who wrote the basic undergraduate text we all started with right around the world, Paul Samuelson, called the theory underlying liberal international trade - “the only proposition in social science that is both true and non-trivial”.
http://www.interest.co.nz/opinion/76229/tim-groser-future-global-trade-u...

Oh the splendor of CER.

With China largely on the sidelines, demand for milk powder is starting to languish. End users have had ample opportunity to stock up on milk powder at historically low prices, and they have done so in volume. Now that their warehouses are full, buyers who were already opportunistic can be downright stingy. It will take increasingly lower milk powder prices to attract much interest. This week the California Weighted Average Price for NDM dropped to 90.5ȼ, its lowest level since August 2009. But apparently this was not low enough. Sales volume fell to just over 10 million pounds, a four month low.
U.S. milk powder production slowed from record-high levels in April, but stocks continue to mount. As of May 31, manufacturers’ stocks of NDM were a record-large 261 million pounds, up 5.2% from April and 18% greater than year-ago volumes.

The U.S. dairy markets asserted their independence once again this
week. Although milk powder prices moved sharply lower at the
Global Dairy Trade (GDT) auction, there was no such collapse at the
CME. In fact, spot nonfat dry milk (NDM) gained 0.25ȼ and closed
at 83.25ȼ/lb.

http://www.milkproducerscouncil.org/updates/070215.pdf

Check out the MG

"Our relationship with suppliers is hugely critical," Mr Helou said. "Milk is not produced from a machine; it's produced from a delicate act of very gentle and sustainable farming in dairy. The supply of milk from our farmers is the beginning of the process, a defining moment."

http://www.smh.com.au/business/murray-goulburn-shares-jump-38-per-cent-o...

The capital raised from the float of Australia's biggest milk processor will help supercharge its path to Asia, Murray Goulburn managing director Gary Helou said after the stock's debut on Friday. The co-operative's shares jumped 14¢ on debut, up 6.7 per cent on its issue price of $2.10 to close at $2.24. The broader market fell 1.1 per cent.

Mr Helou, 53, said engaging with Asia was crucial for the Australian dairy industry. "The Australian dairy industry is set for a good phase of growth if we choose as an industry to connect to the Australian market and engage with Asia; that's what Murray Goulburn is doing," he told Fairfax Media after the listing. "We've done well in the past few years and now, with the capital secured to invest in our strategy, we'll be growing faster and stronger."