Fonterra, the large New Zealand dairy
cooperative which counts among its shareholders some 10,500 farmers in that
country, which claims it accounts for more than 25% of all Kiwi exports, and
which according to its website prepares a container of dairy product for export
every three minutes in peak times, is the arbiter of the price of New Zealand’s
most important commodity, dry powdered milk.
Now Fonterra has announced a further
reduction in the 2014 – 2015 forecast for payments for milk solids to farmers,
to NZD6.00 per kilo. This means a total drop since last season of NZD2.40, from
NZD8.40, or a reduction in combined payments of NZD4.3 billion. The New Zealand
Herald reports that this represents 1.9% of GDP.
NZD sentiment down in all senses
This news has served to confirm the
downward trend in the New Zealand unit since the efforts of the RBNZ to talk it
down. Governor Graeme Wheeler might have written the script for this news
announcement.
For our part, we are awaiting a
pullback in order to take a short position, as we do not chase the market. We
may get this soon, as price has now reached the 200 Day Exponential Moving
Average (EMA – see chart above).
Market sentiment is, in technical
terms, a measure of the balance, or imbalance, between long and short market
participants at any given time. This now seems to be in favour of the NZD
bears. Sentiment for the Kiwi in the emotional sense of the term has also, it
would appear, swung into negative territory.
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