Source: Radio New Zealand
RNZ / Rebekah Parsons-King
Farmers are being warned to brace for a challenging next season after prices eased at the latest global dairy trade (GDT) auction.
The average price at the fortnightly auction fell 2.7 percent to US$4143 (NZ$7025) a tonne.
The price of wholemilk powder, which influences farmer payouts, dropped 0.6 percent.
It comes after prices dropped 3.4 percent at the last auction – the first dip of the year.
Jarden head of commodities Mike McIntyre said even if prices continued to slide, the current dairy season was near its end so he did not expect it to impact the final payout for farmers.
He said of more concern was the ongoing geopolitical uncertainty from conflict in Iran which would likely impact New Zealand farmers next season.
“There’s going to be inflationary pressures come from the likes of fertiliser as well. A lot of fertiliser comes out of that part of the world. And then feed prices and even just general haulage prices as well.
“I think we possibly are going to be in a position like we saw back in 2022, where the CPI [consumers price index] for New Zealand as a whole was around that 7 percent to 8 percent mark, but on-farm inflation was more like 17 percent or 18 percent.
“So I think farmers are going to bear a lot of the pain that is going to be felt in terms of the increase in prices.”
McIntyre said prices were “relatively robust” considering the pressure on supply chain systems to get product to market.
“Typically, you wouldn’t expect to see too much in the way of sliding at this time of the year just because of the seasonal drop-off in volumes that are available on the auction. But with China obviously stepping back in terms of its demand, all else being equal, you’d say ‘yes, possibly we will see some further sliding in prices’.
“What I would say though is, a couple of weeks is a long time in dairy, we’ve already seen talk of an outbreak of foot and mouth in China, and so it wouldn’t take much for that to suddenly cause a step up in demand out of that part of the world.”
He said any further price drops were unlikely to impact the current season’s payout, as the prices were “all but locked in now”.
McIntyre said the most recent auction results were disappointing, though, especially as expectations had been for skim milk to perform better.
“Now that GDT’s got multiple sellers from all around the world, New Zealand skim milk powder prices were actually lower. So even the small positives that we can see in the headlines didn’t translate into a better result for New Zealand farmers.”
This was ultimately a reflection of strong milk volumes holding steady globally.
“You know, we’re going to go through 2 billion solids collected for the season for the first time ever, and that’s a big mark to crack through. And it’s not just New Zealand that’s producing a lot more dairy, with the exception of possibly China, [it’s] right across the globe.
“And so just sheer economics with more milk coming on board that you’d expect to see prices fall. And up until now, we’ve been relatively insulated here in New Zealand, but it seems like maybe some chickens are coming home to roost there.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
