Global dairy prices at the latest Global Dairy Trade (GDT) auction fell 1.3 per cent to US$3487 in a discouraging start to the new season.
Whole milk powder (WMP) prices were down 1.1 per cent to US$3205, though regular grade WMP to ship in August was practically unchanged.
Analysts had been picking either flat or slightly declining prices because of higher volumes being offered, and because premiums of futures over previous GDT have shrunk.
Favourable weather saw a rise in Fonterra’s milk collection by 3 per cent during April, but for the 2017-18 season from June to April, New Zealand farmers produced 2 per cent less milk than the year before.
The latest result contrasted with the final auction for the season last month when prices lifted1.9 per cent overall to reach US$3637.
Federated Farmers dairy chairman Chris Lewis said the rise in the value of the New Zealand dollar would contribute to even lower returns, but such factors were sometimes out of the country’s control.
Some analysts have been picking the dollar to fall to 65c against the US, but in fact it has recently lifted to just over the 70c mark.
“What with GDT falling slightly and the dollar going up, some accountants will be looking at their balance sheets,” Lewis said.
Farmers were used to spikes and dips in prices, but as long as the overall value remained at the $3300 level, they would be happy.
Most processors had delivered positive farmgate forecasts in recent weeks in the region of $7 per kilogram of milksolids. Lewis sounded a note of caution, saying it was better to under promise and then over deliver.
The most dramatic change in the overnight auction was seen in butter milk powder, which jumped by 17.7 per cent.
AgriHQ pointed out there was a greater volume of WMP on offer than had been forecast. WMP volumes for the auction were lifted 7.6 per cent from forecasts. Buyers bought more WMP than they did at the May 15 event, but they were unwilling to pay more for it.
Butter prices fell 3.5 per cent, anhydrous milkfat was down 1.7 per cent. Skim milk powder prices were up marginally, lifting 0.3 per cent.
Cheddar prices were down 3.6 per cent, lactose lifted 3.9 per cent and rennet casein prices rose 2.7 per cent.
By: GERARD HUTCHING