Fat slide hits global market

Butter and cheese price fall causes drop in Global Dairy Trade auction


Australian Dairyfarmer News
FALLING PRICES: Prices fell for several commodities, including cheese, at Tuesday night's Global Dairy Trade auction.

FALLING PRICES: Prices fell for several commodities, including cheese, at Tuesday night's Global Dairy Trade auction.

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Big falls in cheese and butter prices saw the Global Dairy Trade price index to fall 3.4 per cent in Tuesday night's auction.

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Big falls in cheese and butter prices saw the Global Dairy Trade price index to fall 3.4 per cent in Tuesday night's auction.

The cheddar index fell 14pc, while butter prices were down 10.3pc.

Most categories took a hit at the auction with butter milk powder down 10.1pc, anhydrous milk fat down 5.7pc, skim milk powder down 4pc and whole milk powder down 1.5pc.

Only lactose (up 0.4pc) and rennet casein (up 4.2pc) defied the trend.

But analysts are not concerned that the fall will have an impact on the bullish outlook for dairy prices.

New Zealand bank ASB senior economist Mark Smith said the fall in butter prices checked recent gains, but prices were still 23pc higher than at the end of last year.

"This may indicate an easing in global milk fat (butter) markets," he said.

"The sudden slowdown in NZ production given the hot and dry summer weather had previously put the squeeze on milk fat markets.

"Last night's result suggests some pullback."

Mr Smith said whole milk powder prices were treading water but the 1.5pc fall was broadly in line with expectations.

"This result is neither here nor there for our milk price forecasts, given the low volumes on offer," he said.

"How prices fare during the spring flush will be the next key test.

"We continue to expect dairy prices to move towards a cyclical peak later in the year."

Westpac NZ senior economist Anne Boniface said the auction result was softer than it had expected, but it still retained its view of higher prices for 2019/20 compared with 2018/19.

But it did expect to see dairy prices soften modestly over the second half of this year, as global supply increased a little against a backdrop of relatively firm demand.

This story first appeared on Australian Dairyfarmer

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