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Milk Powder Climbs to Record as NZ Drought Curbs Supply Vote_lcap68%Milk Powder Climbs to Record as NZ Drought Curbs Supply Vote_rcap 68% [ 178 ]
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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Milk Powder Climbs to Record as NZ Drought Curbs Supply

Milk Powder Climbs to Record as NZ Drought Curbs Supply

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1Milk Powder Climbs to Record as NZ Drought Curbs Supply Empty Drought drives up dairy prices Fri Mar 22, 2013 11:39 am

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
RICHARD MEADOWS

Drought conditions have pushed international dairy prices to record highs and may bump up farmgate returns but the country's farmers have no cause for celebration.

Prices at Fonterra's latest online dairy auction soared to five-year highs on Tuesday night, marking the seventh straight gain.

The price of a basket of dairy goods surged a massive 14.8 per cent compared with the last sale two weeks ago, reaching its highest point since December 2007.

"While it's nice to see very big price gains on international markets, it's not a good news story when you look at what's driving it - which is a lack of milk in New Zealand," BNZ economist Doug Steel said.

The volume of dairy products sold has halved in the space of a month to 15,994 metric tonnes as production winds down through the tail end of the season.

"It's economics 101, really," Steel said.

"With very tight supply, we've seen a big squeeze with higher prices."

The entire North Island was declared an official drought zone last week and parts of the South Island also remain very dry.

Steel said there was likely to be some upside to Fonterra's forecast payout of $5.50 per kilogram of milk solids, plus a 40c-50c dividend.

However, he warned that the dairy co-op had already factored in rising prices during its last forecast update in late February, so it would be a question of degree.

The average winning price at the auction rose to US$4683 (NZ$5685) per metric tonne, up from US$4216.

Seven of the nine product categories rose and two weren't traded.

The key wholemilk powder product category, the largest by volume, rose 21.2 per cent.

The auction recorded 185 participants out of 785 qualified bidders taking part, with 82 winning bids.

The successful result also had Westpac economists firming up their return forecasts.

The bank's agri-economist, Nathan Penny, was picking a payout of at least $5.65 a kilogram plus dividend for the current season, and $5.90 a kilogram plus dividend next season.

However, the total income that many farmers will receive is not so rosy.

Westpac is warning that the country's milk production could drop for the first time in five years if the drought conditions persist.

Penny said milk production for the 2012-2013 season might fall by as much as 2 per cent, despite growing herd sizes and a bumper spring.

"It all depends on when the rains come," he said.

As recently as last month, Westpac was still expecting total production to rise slightly from last year but the drought had since pushed production levels "off a cliff".

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Westpac agribusiness head David Jones warned that the full financial effects of the drought might still be several months away.

FLOW-ON EFFECTS Fonterra, which collects most of the milk that ends up in New Zealand household fridges, won't be drawn on whether surging world dairy prices will soon lead to price rises at the supermarket chiller.

Fonterra Brands, which says it has to buy its milk from Fonterra at world prices, said it would not be making any immediate changes to its wholesale pricing in New Zealand. Fonterra's only real competitor at the dairy product chiller is Goodman Fielder, which also buys its milk from Fonterra. Fonterra Brands managing director Peter McClure said it took time for international prices to flow to the domestic market.

International prices were trending up but Fonterra Brands needed to get a firmer feel for prices longer term, he said.
http://www.stuff.co.nz/taranaki-daily-news/8453272/Drought-drives-up-dairy-prices

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
Is this a reason NEST price going up?

CSE.SAS

CSE.SAS
Global Moderator
Whole milk powder climbed to a record as New Zealand’s most widespread drought in at least 30 years curbs supply in the world’s largest exporter, according to Fonterra Cooperative Group Ltd. (FCG).

Powder for next month’s (May) delivery gained 22.8%t, the biggest advance since Sept. 1, 2010, according to a trade-weighted index on GlobalDairyTrade. The near-term contract for New Zealand product rose to $5,313 a metric ton (MT). The previous record was $4,958 on March 1, 2011.

A drought declared across the entire North Island including Waikato province, the country’s biggest milk producer, may cost NZ$2 billion ($1.7 billion) as dry conditions threaten economic growth, the government estimates. Growth in milk volumes will probably slow to 1% this year after expanding 6% at the start of the season as the drought hurts production, Fonterra chief executive officer Theo Spierings recently said.

New Zealand’s central bank held the cash rate at a record low on March 14 and cited concerns that dry conditions may “substantially reduce economic output.” Dairy exports last year made up 25% of all merchandise exports abroad.

Dairy-production may slow or be little changed in the year to June 30 after rising 11% a year earlier, according to ASB Bank Ltd. Milk supplies may be as much as 15-20% below a year earlier through the third quarter, Rabobank International said. About 61% of the country’s milk is produced on the North Island, Rabobank estimates.

“Even if good quantities of rains fall, it will take a long time for pasture covers to rebuild,” NZX Agrifax said. “We are unlikely to see much of a resurge in milk production, which is already trending well below last season.”

The government is also watching parts of the South Island that are very dry, Minister for Primary Industries Nathan Guy said.

Fonterra which accounts for about 40% of the global trade in dairy products, sells whole, skim and butter-milk powder, dried-milk fat, lactose, butter, cheese and casein at its GlobalDairyTrade auctions. The company offers monthly contracts with delivery starting from two months after the sale. Casein is a protein found in milk.

Whole-milk powder for June delivery rose 25% while prices across all five product contracts out to September rose 21%, Fonterra said.

In other auctions, prices for May delivery of milk fat, butter, casein, cheddar, skim and butter-milk powder also increased. Lactose and milk protein concentrate weren’t offered (Bloomberg).

http://www.thesundayleader.lk/2013/03/31/milk-powder-climbs-to-record-as-nz-drought-curbs-supply/

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Should we be really concerned when we see truck loads of locally produced milk being dumped in to waterways.
I reliably understood that Kotmale Long life (UHT) milk has a very poor demand among the locals.
Let us change our habits and preferences and then a drought in another part of the world will not be something to be so concerned and alarmed about. pale

sriranga

sriranga
Co-Admin
http://www.dairyco.org.uk/market-information/milk-prices-contracts/wholesale-prices/world-wholesale-prices/wmp-prices/

http://sharemarket-srilanka.blogspot.co.uk/

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