New Zealand : Dairy prices still volatile despite small rise

An analyst warned Wednesday that the dairy prices of New Zealand was still volatile although a rise in international dairy prices has given New Zealand farmers a sliver of hope that prices might be recovering.
The Fonterra-run GlobalDairyTrade (GDT) auction average price rose 2.4 percent to 2,609 U.S. dollars over Tuesday night, up from 2,513 U.S. dollars, the lowest level since August 2009, two weeks ago.
However, the AgriHQ agricultural analysts said although the fortnightly auction price was up, prices on the New Zealand dairy futures market had fallen to 2,500 U.S. dollars over the past two weeks.
"It is too early to say whether this positive price trend delivered by GDT will continue into 2015," AgriHQ dairy analyst Susan Kilsby said in a statement.
Last week, Fonterra advised the market that it expected to collect only the same volume of milk this season as it did in the 2013-2014 season.
"This message that milk supply is expected to tighten might have also prompted some additional buyer activity at this auction, " Kilsby said.
Last week, analysts warned that the New Zealand economy could lose 6 billion NZ dollars (4.64 billion U.S. dollars) after dairy giant Fonterra slashed its forecast payout to farmers for the 2014- 2015 season from 5.30 NZ dollars (4.09 U.S. dollars) per kg of milk solids to 4.70 NZ dollars (3.63 U.S. dollars).
Fonterra chairman John Wilson said falling oil prices, geopolitical uncertainty in Russia and Ukraine, and subdued demand from China as it continued to work through inventory were all contributing to ongoing volatility and weak demand.
Industry body DairyNZ said the forecast payout was the lowest in six years, following on from the record 8.40 NZ dollars (6.49 U. S. dollars) per kg of milk solids last season, and would mean challenging times ahead as about 86 percent of New Zealand milk came from Fonterra farms.
On Tuesday, the New Zealand Treasury said the government was heading for its seventh operating deficit in a row in the 2014- 2015 fiscal year as falling dairy prices hit revenues, forcing the Treasury to change its previous forecast of a small operating surplus.
A report from the Ministry for Primary Industries earlier this month forecast international dairy prices to remain "relatively low" in 2014-2015, with a gradual recovery from the first half of 2015 as growth in demand shifted to exceed supply in key markets.