5 Aug 2015

Further fall in global dairy prices predicted

5:33 am on 5 August 2015

A dairy analyst is expecting a further fall in dairy prices in the global dairy trade auction tonight.

Milk at Pak n Save Kilbirnie.

Photo: RNZ / Alexander Robertson

The average price dropped by a whopping 10.7 percent at the last sale a fortnight ago and the key commodity, whole milk powder, by even more: 13 percent.

AgriHQ analyst Susan Kilsby said dairy markets were showing no signs of picking up, and increased volumes of whole milk powder being offered for auction tonight will keep the pressure on prices.

"I mean, this is typical for this time of the season, when we're starting to sell the news season's product.

"Volumes for whole milk powder are up by 75 percent, compared with the last auction, so there's a lot more product to move through, and certainly a lot of the product didn't even move off its starting price at the last auction.

"So we are expecting prices to come back again at the auction tonight."

Ms Kilsby said the futures market was indicating that whole milk powder prices could drop by another 11 or 12 percent at tonight's auction.

She said the strong growth in milk production in all dairy export regions - the EU, US, New Zealand and Australia - was not helping.

"Even within China we saw strong growth earlier in the year," she said.

"I think things are starting to turn, certainly in the US, the growth is slowing.

"In the EU, we've seen quite strong growth in certain countries, but milk prices are continuing to decrease there, which is putting pressure on [its] farmers.

"So I think the rate of growth isn't going to be massive out of the EU, but at the moment the market is so weak that any growth is putting pressure on prices - and it's going to take a little longer for the markets to rebalance all the milk that's available."

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