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The premium required for butter and cream over milk protein has decreased due to pressure from restaurants and foodservice companies.
Dairy auction prices fell for the third consecutive auction Tuesday night. Overall prices for dairy products fell 1 percent, while whole milk powder fell 2 percent and butter 1.2 percent.
The only category that won was skimmed milk powder, the price of which was up 1.8 percent.
Westpac senior agroeconomist Nathan Penny said Covid-19 was “literally slashing fat” from prices.
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“Creams and butters are highly exposed to restaurants, bakeries and other food service outlets. Think of delicious restaurant desserts and cakes. And the Covid restrictions coupled with the general reluctance of people to eat out has reduced the demand for these products, “he said.
Milk fat prices had fallen more than 20 percent after the Covid and did not look like they were ready to rebound.
They were at their lowest level since mid-2016, when scientific evidence had shown that milk fats were not as unhealthy as previously thought, prompting a renaissance in popularity, he said.
Skim milk prices had also declined in May but, unlike milk fat, they had recovered about half of their previous losses.
The slight rebound observed in the July auction did not ultimately indicate a return to normalcy. Milk fat prices would be a more definitive sign that dairy prices had turned around, he said.
“While overall dairy prices are below year-ago levels, we expect the worst of the Covid impact to be over. On that basis, we stick to our 2020/21 milk price forecast of $ 6.50 kilograms. “
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Golden Bay farmer Wayne Langford is the president of the Federated Farmers dairy.
Despite that, Penny said that if prices continue to fall in upcoming auctions, with the larger ones looming, Westpac would consider revising its milk price forecast lower.
Federated Farmers dairy president Wayne Langford said the price drops had been relatively small.
“Considering the way the world is sitting right now, we’re glad we don’t see massive fluctuations. Prices are relatively stable, ”he said.
Fonterra had once again kept its advance rate payment at the midpoint of $ 6.40, it said.
ASB’s Weekly Commodity Report said the final milk price on the farm for the year through May 31, 2020 would be announced along with Fonterra’s annual results on September 18.
Fonterra works on an annual cycle from June to May, which farmers call seasons.
ROSS GIBLIN / THINGS
Miles Hurrell, CEO of Fonterra, says the rules covering the dairy industry must be changed to allow for a level playing field that covers all companies.
Langford said prices were likely to recover quickly when the world situation stabilized and farmers were quietly optimistic that prices would hold until then.
Waikato dairy farmer Mike Garrud said his production increased slightly from last year and that he had had the best August for several seasons.
“The grass is growing and we have good calves. If the weather was going down and there was mud everywhere, I would be a little less optimistic, “he said.
