Whole-milk powder prices tumbled to their lowest level since 2009 on concern purchases from China, the world’s biggest buyer, may decline as favorable weather boosts global supply.
Powder for June delivery slumped 14 percent to $2,766 a metric ton, the lowest level since Aug. 4, 2009, according to the weighted-average price from Fonterra Cooperative Group Ltd., the world’s largest dairy exporter. The drop, the ninth consecutive decline, was the most since August 2010, it said.
“There’s still ample supply out of New Zealand and there’s talk that Chinese buyers are out of the market,” said Michael Harvey, an analyst at Rabobank International. “They’ve filled the quota from New Zealand quite quickly and have built up a short-term stockpile. There’s an expectation that they’ll be out of the market for a couple of months.”
Whole-milk powder plunged 22 percent this year as record prices in 2011 and good weather in most regions spurred production. The New Zealand-China Free Trade Agreement allows the export of some New Zealand dairy products under preferential tariff rates to a certain level. Prices may continue to soften this quarter on surging global supplies, Fonterra Chief Executive Officer Theo Spierings said March 29.
China’s whole-milk powder imports climbed 45 percent in February and purchases of skim-milk powder were more than double the same level a year earlier, according to NZX Agrifax.
Milk output in the U.S., the largest producer, will rise 1.8 percent to a record 199.7 billion pounds (90.6 million tons) in 2012, the Department of Agriculture estimates. Fonterra’s milk collections this season are up 10 percent from the same period in 2011, the company said last month.
“There’s a lot of milk around short-term and it will have to flush through the system but at the end of the year, we think the market should have stabilized and possibly even see some kind of recovery,” Harvey said from Melbourne today. “Demand is pretty healthy in markets like the Middle East and Southeast Asia, so that’s going to support prices.”
Auckland-based Fonterra said yesterday it will invest in a blending and packing plant in Indonesia to meet a forecast 50 percent surge in dairy demand in the next eight years. The company will spend NZ$100 million ($82 million) on two more dairy farms in China to meet rising demand, it said April 12.
Whole-milk powder reached a record $4,958 a ton in March last year, buoyed by demand from Asia and supply concerns in New Zealand. Milk futures traded on the Chicago Mercantile Exchange have slumped 14 percent this year after climbing 31 percent in 2011. That compares with a 5.4 percent gain in the Standard & Poor’s GSCI Spot Index this year.
Fonterra sells whole and skim-milk powder, dried-milk fat, cheese, and casein at its GlobalDairyTrade auctions. The company offers one-month contracts with delivery from two months after the sale, and two three-month contracts with delivery three and six months later.
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