Dairy prices rose to their highest level since January at the GlobalDairyTrade auction, but benchmark whole milk powder prices were down, amid ideas that New Zealand dairy production has been much better than previously thought.
Dairy prices, as measured by the GlobalDairyTrade index, rose by 3.4% at the latest bi-monthly auction event.
But the rise disguised diverging fortunes, as whole milk powder prices fell back 1.7%, while prices for skimmed milk powder soared 12.1%.
Premium narrows
The jump in skimmed milk powder marks a change in fortunes for the commodity, which has been falling back against whole milk powder.
At the last the discount of skimmed milk powder to whole milk powder reached $593 a tonne, the highest since October 2013.
After Wednesday's auction, the premium stands at just $338 a tonne.
Supportive summer
The performance for whole milk powder prices was slightly worse than expected, with production from New Zealand, the world's top exporter and the dominant player in whole milk powder markets, proving more resilient than thought.
"New Zealand late‑season production has held up better than expected thanks to good summer pasture availability," said Tobin Gorey, at Commonwealth Bank of Australia.
Dairy Australia said New Zealand's production had fallen less than expected, due to "with timely rainfall and warm temperatures maintaining good pasture cover in many regions".
And for farmers who use feed in addition to pasture" lower demand and a shortage of storage for supplementary feeds such as feed grains, palm kernel and maize silage are contributing to sharp price reductions for these products," the industry body said.
Milk production in New Zealand was down 2.1% year on year between June 2015 and March 2016, Dairy Australia said, with overall production in the year to May 31 2016 down by just 3%.
Earlier in the season there was talk that production might fall by as much as 10%.
Global surplus
Dairy Australia warned that globally, "supply continues to outpace demand," and inventories are building up, particularly in Europe.
"The European Union continues to produce significant growth, while US farmers have seen margins cushioned by cheap feed grain prices."
"These stocks will likely slow any emerging price recovery," the industry body said.
Australian production to fall
Still, Australian production is expected ease due to lower prices paid to farmers.
Australian farmers in the southern, export-focused regions saw cuts to farmgate milk prices in April and May of this year.
"Although it remains too early to quantify the impact of the recent milk price cuts, it is clear that farmer confidence will be significantly impacted," Dairy Australia said.
But this fall in confidence could result in lower output in 2016-17, which would be supportive for the global milk market.
"As always, regional variation is expected, but a national volume total below that of 2015-16 is considered highly likely," Dairy Australia said.
Resource: http://www.agrimoney.com/news/dairy-prices-hit-4-month-top-despite-whole-milk-powder-weakness--9607.html
Dairy prices, as measured by the GlobalDairyTrade index, rose by 3.4% at the latest bi-monthly auction event.
But the rise disguised diverging fortunes, as whole milk powder prices fell back 1.7%, while prices for skimmed milk powder soared 12.1%.
Premium narrows
The jump in skimmed milk powder marks a change in fortunes for the commodity, which has been falling back against whole milk powder.
At the last the discount of skimmed milk powder to whole milk powder reached $593 a tonne, the highest since October 2013.
After Wednesday's auction, the premium stands at just $338 a tonne.
Supportive summer
The performance for whole milk powder prices was slightly worse than expected, with production from New Zealand, the world's top exporter and the dominant player in whole milk powder markets, proving more resilient than thought.
"New Zealand late‑season production has held up better than expected thanks to good summer pasture availability," said Tobin Gorey, at Commonwealth Bank of Australia.
Dairy Australia said New Zealand's production had fallen less than expected, due to "with timely rainfall and warm temperatures maintaining good pasture cover in many regions".
And for farmers who use feed in addition to pasture" lower demand and a shortage of storage for supplementary feeds such as feed grains, palm kernel and maize silage are contributing to sharp price reductions for these products," the industry body said.
Milk production in New Zealand was down 2.1% year on year between June 2015 and March 2016, Dairy Australia said, with overall production in the year to May 31 2016 down by just 3%.
Earlier in the season there was talk that production might fall by as much as 10%.
Global surplus
Dairy Australia warned that globally, "supply continues to outpace demand," and inventories are building up, particularly in Europe.
"The European Union continues to produce significant growth, while US farmers have seen margins cushioned by cheap feed grain prices."
"These stocks will likely slow any emerging price recovery," the industry body said.
Australian production to fall
Still, Australian production is expected ease due to lower prices paid to farmers.
Australian farmers in the southern, export-focused regions saw cuts to farmgate milk prices in April and May of this year.
"Although it remains too early to quantify the impact of the recent milk price cuts, it is clear that farmer confidence will be significantly impacted," Dairy Australia said.
But this fall in confidence could result in lower output in 2016-17, which would be supportive for the global milk market.
"As always, regional variation is expected, but a national volume total below that of 2015-16 is considered highly likely," Dairy Australia said.
Resource: http://www.agrimoney.com/news/dairy-prices-hit-4-month-top-despite-whole-milk-powder-weakness--9607.html
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