Dairy prices
A SMALL slide of 0.9 per cent on the GlobalDairyTrade's trade-weighted index put a halt to four consecutive gains in the fortnightly auction on Tuesday night. The GDT had been making fortnightly gains of 3.5pc, 7.8pc, 6pc and 2.4pc since August 1.
But Dairy Australia senior analyst Norman Repacholi says while it is somewhat disappointing, that the GDT TWI has decreased, the important thing to take note of is whole milk powder.
"WMP is where New Zealand makes the biggest impact and the average price for WMP increased by 2.8pc, so I wouldn't see the result as negative," he said.
"It's more just a reflection that there is a bit of concern now over the upcoming NZ season.
"A lot of NZ's production is geared towards getting WMP onto the export market so, given the price is 2.8pc up, that suggests there are still some Chinese buyers and other buyers in the market for WMP, which is the most important indicator to come out of the GDT auction."
Mr Repacholi said while he did not expect a 0.9pc drop on the GDT TWI, it was a reasonable result given most other less-traded commodities had decreased, including rennet casein which was down by 9.5pc and cheddar which was down 7.4pc.
"The key thing is that WMP is still increasing, but there will be a number of buyers who will be watching as the NZ season progresses because northern hemisphere production is winding down, so most of the attention is going to be on southern hemisphere production," he said.
There were still some risks, however, and one of those was recovery in production out of NZ.
Mr Repacholi said that, coupled with the potential for another economic meltdown in the European Union, these represent the two major risks threatening milk price – and the strong $A.
"For both scenarios, the EU seems to be managing its affairs fairly well and NZ production increased 10.8pc last year, so it will be fairly difficult to increase by the same amount this season," he said.
"It's probably still a bit early in the game to be expecting too many step-ups, but it certainly paints a more positive picture than what it did three months ago.
"The big challenge is also what happens with the $A for the local export market."
Source: farmonline.com.au