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6 May 2015
NZ dairy prices keep falling - ANZ
FXStreet (Bali) - ANZ shared its insights on the latest NZ GlobalDairyTrade auction, noting that yet another 3.5% decline was confirmed, adding that there were very few bright spots.
Key Quotes
"Overnight the GlobalDairyTrade auction registered another decline of 3.5% to US$2,515/t. The decline was led by skim milk powder (SMP) and anhydrous milkfat prices, which were back 7.5% and 6.3% respectively. Whole milk powder (WMP) prices registered a more sedate 1.8% decline."
"The price action for SMP points to immense competitive pressure from both the US and Europe (the two largest global suppliers) with prices now down 30% over the last four auctions. Prior to the last auction New Zealand sourced SMP was trading at a premium of US$100-200/t over Europe and the US, which is not unusual as we enter the off-season."
"However, overnight’s auction result pulled New Zealand sourced product below both competitors. Europe remains the focal point for New Zealand with reportedly aggressive selling into key regions, such as North Africa, Middle East and Asia (ex. China)."
"This pressure is unlikely to abate in the near-term with recent reports suggesting Russia will extend their import ban until at least the end of the year and want to be self-sufficient in milk supply within the next 7-10 years. Europe also needs to move the peak of this year’s seasonal supply (March-May)."
"The only real bright spot is that international prices are now only approximately US$100-150/t from intervention prices in Europe, suggesting one backstop is fast approaching."
"With local dairy farm budgets showing a hole of anywhere from $0.5-$1.5/kg MS, this suggests seasonal finance requirements could stack-up toward $1.85 billion in 2015/16 (nearly 5% of total outstanding debt) unless more cost efficiencies can be found."
Key Quotes
"Overnight the GlobalDairyTrade auction registered another decline of 3.5% to US$2,515/t. The decline was led by skim milk powder (SMP) and anhydrous milkfat prices, which were back 7.5% and 6.3% respectively. Whole milk powder (WMP) prices registered a more sedate 1.8% decline."
"The price action for SMP points to immense competitive pressure from both the US and Europe (the two largest global suppliers) with prices now down 30% over the last four auctions. Prior to the last auction New Zealand sourced SMP was trading at a premium of US$100-200/t over Europe and the US, which is not unusual as we enter the off-season."
"However, overnight’s auction result pulled New Zealand sourced product below both competitors. Europe remains the focal point for New Zealand with reportedly aggressive selling into key regions, such as North Africa, Middle East and Asia (ex. China)."
"This pressure is unlikely to abate in the near-term with recent reports suggesting Russia will extend their import ban until at least the end of the year and want to be self-sufficient in milk supply within the next 7-10 years. Europe also needs to move the peak of this year’s seasonal supply (March-May)."
"The only real bright spot is that international prices are now only approximately US$100-150/t from intervention prices in Europe, suggesting one backstop is fast approaching."
"With local dairy farm budgets showing a hole of anywhere from $0.5-$1.5/kg MS, this suggests seasonal finance requirements could stack-up toward $1.85 billion in 2015/16 (nearly 5% of total outstanding debt) unless more cost efficiencies can be found."