Dairy prices fell for a second successive GlobalDairyTrade auction – and at the quickest session in five years – amid ideas of an easing off in the bargain hunting which revived prices from their August low.
Prices at GlobalDairyTrade, the auction site run by New Zealand dairy giant Fonterra, fell by 7.4% at Tuesday’s event, led by a fall of 11.2% in offers for rennet casein.
Values of whole milk powder, which accounts for the bulk of volumes sold, dropped by 8.0%
The decline took to 10.3% the drop in average GlobalDairyTrade values over their past two sessions, although prices remain a comfortable 46% above the near-13-year low they reached in August.
Short session
Tuesday’s decline came amid ideas of buyers, who had bought reasonably heavily into the market recovery from mid-August to last month, being deterred by the extent of the price revival.
While consumers who had been tempted “to lock in pricing at relatively favourable levels… this activity has reportedly quietened in recent weeks as prices have recovery”, a briefing from industry group Dairy Australia said.
The latest auction lasted 10 rounds, matching the shortest in the past 18 months, and well down from the 17 rounds at the early-October event, when prices hit their recent peak.
In time terms, Tuesday’s auction, at 1 hour and 32 minutes, was the quickest since August 2010.
‘No shortage’
The price decline at the event had been anticipated by many investors, given continued weakness in dairy futures traded on New Zealand’s NZX exchange.
“The drop was not a big surprise,” said Brendan Curran, risk management consultant at broker INTL FCStone, noting Fonterra’s announcement on Monday of so-called “enhanced age” milk powder, guaranteed of recent manufacture, and viewed by many observers as a sign of the extent of aged product in store.
“It does not seem there is any shortage of powder out there,” Mr Curran told Agrimoney.com.
‘Big question’
The “big question” was whether the price decline would continue, or whether values would flatten out at around current levels, he added.
While “it seems like the powder market is trying to find some stability” at current levels, the apparently cooler pace of demand might warrant some further decline.
However, he also underlined that there are “still some questions in the market over output in New Zealand”, the top milk-exporting country, with the combination of lower prices and the El Nino weather pattern provoking ideas of depressed output.
Already, volumes are reported by industry group Dcanz to have dropped 7.5% in September, although talk from Fonterra is that the group, responsible for processing the vast majority of New Zealand output, saw some recovery last month, with collections apparently falling by a more modest 4%.
October is a key month for New Zealand milk output, bringing the seasonal peak in milk production.
