NZ Dairy Sector: Forward prices at Fonterra milk powder sale
December 7th, 2009
Milk powder prices have climbed for a fifth straight month, reaching a 15-month high in December. The last sale for 2009 caps a remarkable second-half rally which has lifted the price of powder sold through globalDairyTrade by 95% from its lows in July. But participants in the auctions are starting to signal a leveling off in prices through 2010. February whole milk powder, the first contract offered, was sold at US$3,515 a tonne while powder for shipment in June-August garnered a premium of just 4.8%, at US$3,685, a tonne.
Kevin Wilson, ANZ National’s rural economist says “forward prices didn’t have as big a premium which suggests buyers are not so desperate to secure supply.” The price of anhydrous milk fat, a long-life ingredient used in ice cream and chocolate, fell 8.6% to US$4,349, a tonne this month. Fonterra has been watching prices carefully since they moved into the stratosphere, with global trade managing director Kelvin Wickham saying they’ve moved above the long-term sustainable average.
Fonterra expects more price volatility next year as Northern Hemisphere producers respond to this year’s rebound, meaning current tight supply will inevitably ease. For farmers the benefits of strong prices, as always, are tempered by a resilient kiwi dollar, with BNZ chief economist Tony Alexander opining the currency may climb back to US80c next year.
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