Dairy price dip won't last long
Photo:
123rf
An analyst says the new season dip in global dairy prices is likely to be temporary.
Dairy prices fell for the fourth consecutive auction overnight, with the average price down more than 4 percent to US$4274.
The price of wholemilk powder, which strongly influences the payouts for local farmers, fell more than 5 percent, while butter fell 4.3 percent.
Dairy prices have fallen more than 7 percent over the past couple of months.
NZX head of dairy insights Cristina Alvarado said the dip in prices was not surprising as global supply was outpacing demand, but the conditions were not expected to persist for long.
"This is the moment of the year where the US still has a lot of products," Alvarado said.
"Europe - even though they were struggling a bit at the start of the year - they have actually come up to increase their milk production. You can see that flowing through, but Europe goes to the lower side of their season, and we keep heading towards the peak of ours, that should level up."
Alvarado expected the new season's payouts to be close to $10 per kilogram of milk solids - near
the midpoint forecast by Fonterra
.
However, she said ongoing US tariff negotiations should be closely watched as new developments may affect demand patterns for dairy products.
The overnight auction showed generally weaker prices across the board, including a 2.8 percent fall for cheddar, 1.7 percent dip in skim milk power, while mozzarella prices were mostly steady.
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