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GDT average price drops again

Global Dairy Trade auction this morning saw the overall price decline another 6 percent from the August 18th sale.  The average price has declined 13 of the last 14 sales since February.  This is the lowest average price since August 1st, 2012.

Whole milk powder down 4.3 percent, cheddar cheese declined 4.9 percent, butter down 5.6 percent, anhydrous milkfat down 5.8 percent, skim milk powder down 9.5 percent, butter milk powder dropped 12.9 percent and rennet casein fell 14.3 percent.  No lactose or sweet whey powder offered.

The auction is quite disappointing after the last auction when the average price slipped less than 1 percent with some product prices increasing.  That had spurred hopes that the global dairy prices had bottomed-out.  The 6 percent drop on Tuesday dashed those hopes.  Radio New Zealand says Russian sanctions on European dairy products have raised questions about where that product will go.

 

New Zealand’s dairy giant Fonterra has had their credit rating downgraded by Standard & Poor’s.  The cooperative announced last week that it was going to spend $615 million to buy a 20 percent share of China’s infant formula maker; Beingmate plus spend another $555 million to increase their manufacturing capacity in New Zealand.  S & P says the moves indicate a financial risk that is more aggressive than what they had factored into Fonterra’s “A-Plus” rating.  The ratings agency reduced Fonterra’s long-term rating to “A”.

Fonterra’s chief financial officer, Lukas Paravicini says despite the downgrade: “The cooperative continued to enjoy a solid balance sheet position.”

The investment in Beingmate will give Fonterra a bigger distribution network for infant formula in China.  The planned expansion in New Zealand is to meet the anticipated growth in sales.

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