Market News

Dairy markets slip for the day but gain for the week

Dairy prices declined on the Chicago Mercantile Exchange on Friday as pressure from New Zealand came into play.  Cash cheese barrels fell 3.25 cents, blocks lost 2.5 cents, nonfat dry milk declined 2.25 cents while Class III futures lost 35 cents for July and August while the September contract fell 28 cents and December dropped 24 cents.

For the week: cash cheese barrels are 8 cents higher, blocks gained 4 cents, butter is unchanged and nonfat dry milk increased 1.75 cents.  Class III futures for June gained 6 cents, July increased 25 cents, the August contract is up 22 cents and December gained 3 cents for the week.

The market came under pressure on Friday on the news the Reserve Bank of New Zealand reduced interest rates by a quarter-percent and may cut further.  The move was an effort to reduce the value of the New Zealand dollar and increase dairy exports.  The move pushed the Kiwi to a two-year low of 73-cents against the U.S. dollar on Thursday and it held on Friday.  A year ago the rate was 88 cents.

The drop in Chinese dairy purchases pulled the rug out from under New Zealand dairy prices.  The farmgate price for the just-ended 2014-15 production year was NZ$4.40 per kilogram of milk solids, a seven-year low.  For most, that is below the cost of production.  The Reserve Bank of New Zealand says a quarter of the nation’s dairy farmers will have a negative cash flow this year.

The increased competition on the world market comes at a time when the U.S. dollar is strong and so is U.S. milk production.