Dairy News may 8, 2012
news // 9
Supply surge pushing prices down ANDREW SWALLOW
AN OPENING payout
For the time of year, volume cleared in last week’s auction was quite high, so the overall 2.4% drop wasn’t that bad a result considering, he adds. Fonterra’s $6.35/kgMS forecast for the current season is “still pretty safe on that basis,” he believes. However, contracts three to six –
forecast starting with the figure five for the 2012/13 season looks increasingly likely in the wake of another fall in commodity markets. Last week’s Global Dairy Trade event saw the all products, all contracts trade weighted index back 2.4% on the April 17 sale, which in turn was 10.1% down on the April 3 result. Anhydrous milk fat (AMF) took the biggest hit, down 13.6% in the May 1 sale, to average $2,852/t, the commodity’s lowest value since it was launched on GDT in November 2009. In FebANZ National Bank rural economist ruary last year Con Williams. it averaged August through to Novem$6486/t. ber delivery – were “quite Whole milk powder a lot weaker than previ(WMP) and skim milk ously”, back 4.2% to 6.5% powder were down overall, “which is a con2.2% and 4.6% averagcern.” ing $2776/t and $2825/t “It means [Fonterra] respectively. will probably set a more The SMP average is conservative advance rate also the lowest since it and starting payout forewas launched (March cast.” 2010), though last week’s Typically the cooperamean was dragged down by Dairy America and Arla tive releases its first pre(European) product which diction for the coming season in late May. sold at a discount to New Westland has already Zealand origin SMP. forecast $5.70-6.10/ WMP remains well kgMS for 2012/13 with above its GDT nadir, an an advance rate of $3.80/ average of US$1829/t in July 2009, though the New kgMS, notes Williams. “Competitive pressures Zealand dollar was 28% mean Fonterra won’t be stronger last week than far away.” it was then (US82c/NZ$ Williams’ pick is for an today v US64c/NZ$ then) narrowing the gap in local opening figure of $5.75/ kgMS with a dividend currency terms to $3385/t range of 40-50c. versus a low of $2858/t. “That dividend range Only cheddar and laccould be slightly better tose achieved gains last with lower commodity week, up 3.1% and 3% prices.” respectively, the latter Other commentators’ being Australian product were suggesting an openfrom Murray Goulburn. ing Fonterra forecast anyANZ National Bank thing from $5.50 to $5.90/ rural economist Con WilkgMS even before the May liams puts the continuing slide in prices down to 1 GDT event, he notes. The May 1 event surging supply, rather than “means there’s possibly easing demand. “The big thing is a very a little downside on that.” strong finish to the New New Zealand’s 2011/12 Zealand season colliding with the European and season looks set to finish 11% ahead of last year from US peak season and their increased production,” he only 2.8% more cows, hence about 8% is from told Dairy News. increased yield, with pro“Demand continues to duction per cow on course hold up reasonably well.”
for an all time high of 362kgMS. A more normal season will likely see that yield figure fall next year, particularly as farms may well cut spending on fertiliser and feed in light of the likely lower forecast and advance payments. “If seasonal conditions are more moderate next
year I’d expect to start to see an improvement [in prices] towards the back end of 2012.” Another possible price positive is currency taking a correction due to New Zealand’s ongoing 4% current account deficit. “That release valve is coming but I’m not sure what the trigger is.”
Commodity
May 1 mean
GDT peak*
WMP
US$2,776/t
US$4,619/t (March 2011)
SMP
US$2,825/t**
US$4,372/t (June 2011)
AMF
US$2852/t**
US$6486/t (February 2011)
* Average price for all specifications and contracts. ** Lowest average since launching on GDT. WMP’s low as US$1829/t in July 2009.
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