GDT drops 8.9%

The GlobalDairyTrade price index dropped 8.9% in this morning’s auction.

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The drop to US$3,309 a tonne takes the GDT to the lowest price since December 2012.

. . . The New Zealand dollar was trading at 88.16 US cents before the release. It dropped as low as 87.50 cents and was recently trading at 87.65 cents. . .

One factor influencing the price is the drop in the price of corn in the USA which is making milk production cheaper there.

16 Responses to GDT drops 8.9%

  1. Bulaman says:

    At a meeting a few weeks ago the China problem was described..
    In 2008 the Chinese government gave the banks 4 trillion renminbi (about 800 to 900 billion dollars) and told them to spend it. Earlier this year the banks went back to the govt and declared. “we have spent the money where’s the next lot?” The government told them to go away.
    The result has caused credit to dry up. This was first seen in the collapse of demand for logs and now dairy.
    Hang on for an interesting ride to come!

    Like

  2. JC says:

    The biggest problem with China logs is the buildup at their ports. We have been told price isn’t the problem, its the backlog which might take until Christmas to clear.

    Meantime whacking the price back is a useful way to dry up supply ie, situation normal.. but has been in abeyance these last frantic four years.

    JC

    Like

  3. Bulaman says:

    Reason there is a backlog is a lack of credit. No dough no go!

    Like

  4. TraceyS says:

    But only half of Chinese use for timber is construction. The rest is for products, industry or raw materials for export. When the backlog clears surely supply will have adjusted to demand and price will recover. I guess this is basically what JC is saying.

    Like

  5. Bulaman says:

    Way more than half is used in construction/form work
    No money for L/C’s, no credit in construction industry, no demand period. The casualties in the near term will be the contractors who geared up and borrowed millions to buy the mechanised harvesting systems. Then in the long run (when prices recover) the forest grower will take a hit when they can’t get anyone foolish enough to go into the harvesting industry because of what will happen now.
    On shore processing reduces the exposure to this but no one will invest in processing capacity while they are exposed to the possibility of more boom/bust cycles.

    Like

  6. JC says:

    Its really what the buyers have been telling us for the last couple of years.. that space at the wharves is tight but very high internal China demand has kept them just ahead of the game. Now there’s a slowdown and no room to move.

    It might just be the usual commodities cycle or just as likely the centralised economy enforcing a breather, a buildup in competition from elsewhere or just general jitters about a range of things happening in the China economy.

    Whatever, the effect is a slowdown and price reduction for at least some months.

    JC

    Like

  7. TraceyS says:

    I took my figure from here http://www.forest-trends.org/documents/files/doc_2878.pdf page 14.

    Re the rest of your comment that is all correct. But people do seem to get back into it following retrenchment. Hardy I suppose. Reputation as an unsafe industry to work in is a major issue that could discourage the next generation.

    Wouldn’t agree that “no one” will invest in processing on shore.

    Like

  8. TraceyS says:

    “…a new voluntary option for large grants, where companies that receive significant taxpayer funds agree to the Government taking an equity stake in their business.”

    and then…

    “…we don’t think politicians should have their fingers in everyone’s pie. That just delivers bad results.”

    Confused. Does he want bad results?

    But lucky for him who would want the fingers of a green government’s politicians sticking in their pie anyway?

    Like

  9. Dave Kennedy says:

    Currently Joyce controls very heavily what research deserves funding. There needs to be greater flexibility in businesses deterring what is good for them as this will encourage real innovation. It seems ironic that the Greens will provide more business freedom when the current Govt are putting vast subsidies in only one or two industries, this is really dangerous.

    Like

  10. Dave Kennedy says:

    Should read ‘determining’ in second line 😦

    Like

  11. TraceyS says:

    Would you like to explain why you think it is ironic for the Greens to be encouraging freedom?

    Like

  12. Dave Kennedy says:

    It would only seem ironic in this forum Tracey.

    Like

  13. TraceyS says:

    That counts as an explanation?

    Like

  14. farmerbraun says:

    Dave where does this 1 billion come from , and who decides what areas it will be deployed in?

    Like

  15. farmerbraun says:

    Good comment here:-

    “Please, just stop.

    All parties, all politicians, all bureaucrats.

    Just keep government out of the private sector. Tech industries do not need government help. neither does gambling. Neither does movie making. Neither does agriculture. Neither does tourism.

    Just stop. Please.

    Let government deliver police, health care, public education, and social welfare. That’s all.”

    http://www.nbr.co.nz/article/greens-seek-extra-billion-fund-economic-diversification-bd-159253#comment-660547

    Like

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