Our glass is half full (or better)

This morning's globalDairyTrade event declined for the eighth straight time, with the average price US $3449/tonne.  For details on the event as reported in Stuff, see;

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10756632

But in a career of 20 years or more watching markets and announcements the good news tends to outweigh the bad.  And there are some silver linings with recent downward movements in commodity prices;

• the price reductions since August have been minor, averaging 1.5% decline per auction
• this has occurred at a time when financial markets have faced considerable turmoil and hard commodities have fallen in value further
• prices have fallen 8% since the start of August, at the same time the NZ dollar has fallen by 14%.  The strong relationship between commodity prices and the exchange rate is one reason that dairy is so resilient.
• China is expected to rejoin the market in the New Year when they can purchase tariff-free product (current imports will pay tariffs under the NZ / China free trade agreement)
• there is 'an upward sloping yield curve' in pricing for Whole Milk Powder, the product that drives the NZ milk price.  December delivery prices are US$3263/tonne, Jan - March delivery $3301/tonne and April to June delivery is $3562/tonne. 

So all in all, still on track for a $6.75/kgMS milkprice.