5 Apr 2017

Milk prices nudge break-even point for farmers

9:55 pm on 5 April 2017

Prices have risen to 1.6 percent to an average $US3005 a tonne in the latest dairy auction.

Fonterra milk truck picking up Simon Mackle's milk.

Photo: RNZ / Rebekah Parsons-King

It was the second consecutive rise in auction prices after sharp falls in the previous two sales and returns appear to have steadied.

Of the eight products offered for sale, four rose and four dropped in price.

The key whole milk powder commodity, which determines Fonterra's payout to dairy farmers, rose 2.4 percent to $US2924 a tonne, which is around the average break-even point for suppliers.

AgriHQ dairy analyst Susan Kilsby said the auction was, overall, a positive result for farmers.

"Buyers will be aware that New Zealand dairy farmers are having a strong finish to the production season which means there is extra milk powder coming on-line, so in this environment it is very positive to see whole milk powder prices creeping back up."

The sharpest falls in the latest auction were for buttermilk powder and cheese, which had been under pressure because of strong competition from European producers.

The volumes sold were slightly higher than the previous auction.

Last month, Fonterra reaffirmed its forecast milk payout at $6 a kilo of milk solids, with an added 45 to 55 cents to be paid from the co-op's value-added consumer business.

Small Canterbury producer Synlait said price volatility was putting pressure on its forecast payout of $6.25/kg and could even result in a fall below $6.

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