The Weekly Dairy report: Big falls at auction makes bankers cautious for next years prices

As March has now passed the west of the north island gets even drier and prospects for relief in early April look grim for drought areas.

Temperature, not moisture is the restricting factor in the south although most areas report sound feed conditions allowing milking to continue into the autumn.

With increasing use of feed supplements and only an average harvest, the price of feed grains has moved upward rapidly and will further increase the cost structures for those using heavily.

Autumn calving is underway in the northern regions and bobby calves are being offered in increased numbers at saleyards.

This year’s milk production figures are tracking to be 11% ahead of last year, as the record payout, dairy expansion in the south and optimism on future prospects has driven the huge milk flow.

The building of two more driers in the south by Synlait and Westland will help handle these increased volumes and future milk commodity prices will reveal whether Fonterra has got the processing product balance right to process this lift.

This companies interim profit results have revealed a fall in profit by 53% because of their inability to process more milk powders, but they were able to maintain the record cash payout forecast for this year.

The latest dairy trade auction fell by another 8.9% sending nervous waves through the dairy industry as prices now have fallen nearly 20% in the last 3 auctions.

Analysts suggest that it is the increased volumes of product that have eased the market back and making one bank suggest that the predicted payout for next year may be at least $2/kg ms behind this years figure.

Increased costs are now firmly entrenched in many dairy farms structure and this possible fall in income coupled with a lift in interest rates could see some farmers under financial pressure next year.

The Lincoln University Dairy Farm has had to change its policy of buying in silage to prevent nitrate loads leaching through its soils, as it looks to fine tune it’s management and work within environmental guidelines.