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Fonterra internet prices down
New 7:55AM Thursday Jul 02, 2009
The average wholesale milk powder price in the overnight auction for July on Fonterra's Global Dairy Trade online trading platform was US$1,829 a tonne, down 3 per cent from June.
The internet-auction market remains a long way off the high prices of almost US$5,000 a tonne, recorded back in November 2007.
US Department of Agriculture figures show wholesale milk powder prices on international markets have not been this low since at least 2004.
Fonterra forecast a NZ$4.55/kg payout for the current 2009/10 year in May when the wholesale milk powder price was over US$2,100 a tonne and the currency was forecast to be around US59c.
Since then the wholesale price has fallen a further 15 per cent and the currency has strengthened 8 per cent to US64c, suggesting an eventual payout closer to or even below NZ$4/kg if prices stay this low and the currency stays strong for the rest of the season.
Given the size of the dairy sector's contribution to the economy, this has the potential to lengthen and deepen the recession, drive dairy land prices lower and depress regional areas such as Waikato, Taranaki, South Canterbury and Southland that depend on the dairy payout for a large chunk of economic activity, says interest.co.nz.
"Also, this will further pressure newly converted large dairy farms struggling under heavy debts", the banking and finance website says.
Moody's has warned that banks in New Zealand face challenges because of the strong lending to new dairy farms in recent years.
- INTEREST.CO.NZ
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10582027