Whole milk powder prices have dropped to their lowest level since 2008 – putting more downward pressure on Fonterra’s farmgate milk price forecast and reinforcing the market view that the Reserve Bank will cut interest rates twice this year to partly compensate.
At yesterday’s auction the GlobalDairyTrade index dropped by 9.3 per cent to post its tenth consecutive decline since March. Whole milk powder prices – which largely determine Fonterra’s farmgate milk price – dropped by 10.3 per cent to US$1590 a tonne.
The price of skim milk powder – a key product for the country’s second biggest dairy co-op, Westland Milk – dropped by 14.4 per cent to US$1419 a tonne.
At US$1590 a tonne whole milk prices were well short of the US$3500 a tonne needed to make the $5.25 per kg of milksolids forecast a reality.
Chief executive Theo Spierings and chairman John Wilson are expected to release a downwardly revised forecast tomorrow – and some economists predict the milk price could go as low as $3.50 a kg.