Back
6 Aug 2014
NZ dairy auction price levels on free-fall - ANZ
FXStreet (Bali) - ANZ Strategists share their thoughts on the latest NZ dairy auction, which saw the Global Dairy Trade TWI register an 8.4% drop.
Key Quotes
Dairy prices continued their deep plunge lower overnight. The GlobalDairyTrade TWI registered an 8.4% drop, with whole and skim milk powder down 11.5% and 6.5% respectively.
The plunge lower in prices looks very similar to the events in early-2009 and mid-2012.
Price levels reached overnight for WMP are now approaching the levels reached during this period and are below the cost curve for all major exporters (including NZ), so we are now starting to enter uncharted territory.
Since 2006 dairy markets have been notoriously volatile, so let’s just hope the bounce back is as aggressive.
For dairy farmers, the added conundrum is the high NZD, with Fonterra’s hedging policy probably having largely locked them in for the 2014/15 season around NZD0.83.
At overnight prices we estimate the milk price would be $4.90/kg MS. This well below the recent forecast update of $6.00/kg MS. Luckily year-to-date pricing is in the low $6/kg MS, but farmers will be budgeting accordingly (i.e. $5.50/kg MS).
Key Quotes
Dairy prices continued their deep plunge lower overnight. The GlobalDairyTrade TWI registered an 8.4% drop, with whole and skim milk powder down 11.5% and 6.5% respectively.
The plunge lower in prices looks very similar to the events in early-2009 and mid-2012.
Price levels reached overnight for WMP are now approaching the levels reached during this period and are below the cost curve for all major exporters (including NZ), so we are now starting to enter uncharted territory.
Since 2006 dairy markets have been notoriously volatile, so let’s just hope the bounce back is as aggressive.
For dairy farmers, the added conundrum is the high NZD, with Fonterra’s hedging policy probably having largely locked them in for the 2014/15 season around NZD0.83.
At overnight prices we estimate the milk price would be $4.90/kg MS. This well below the recent forecast update of $6.00/kg MS. Luckily year-to-date pricing is in the low $6/kg MS, but farmers will be budgeting accordingly (i.e. $5.50/kg MS).