Dairy prices continue to fall: Fonterra

Posted by Editorial on 8th January 2009

The results from the January trading event of Fonterra’s internet-based sales platform, globalDairyTrade, has reflected a continued softening in international dairy prices.

Milk splash

The trading manager, CRA International, advised Fonterra that the average price achieved across all products and contract periods for Whole Milk Powder (WMP) was US$2,017 per tonne FAS New Zealand Port – 9.3 per cent lower than for the previous trading event in December.

Spot prices rose 1.3 per cent above those for the December trading event.

“This result reflects current trading conditions,” said Kelvin Wickham, Fonterra’s Managing Director of GlobalTrade. “Dairy prices have fallen as a result of a cyclical lag between supply and demand responses, though this has been accelerated by the demand downturn resulting from the global financial crisis and recession.”

Mr Wickham added that their analysis indicated an upturn in the price may not be too far away. “The spot price increase is encouraging and we hope this is a sign of things to come,” he said. “Our own supply and demand analysis indicates that we are near the bottom of the price cycle. While global inventories still need to be worked through, the current price levels represent excellent buying.”

Since July, WMP prices are down 54 per cent, within the range of decline for other dairy commodities. During the same period, globally-traded cheese, butter, casein prices have all fallen by between 45 per cent and 55 per cent.

The current volatility in the international dairy market is highlighted by a 37 per cent drop in the spot price for US barrel cheese on the Chicago Mercantile Exchange since the previous globalDairyTrade event one month ago.

The prices of other agricultural commodities have fallen by similar amounts. Since their June-July 2008 peaks, the prices of barley, maize, soybean meal and wheat have fallen between 35 per cent and 55 per cent.

The next globalDairyTrade trading event will be held on February 3, 2009.