Global dairy prices fall, muted by ramped up New Zealand supply

  • Global dairy prices dip 1.3 pct
  • Pares previous month's gains which saw prices hit 9 month high
  • Result due to stronger supply in key products -analyst
A cow in front of Fonterra Kauri plant
A cow in front of Fonterra Kauri plant

Charlotte Greenfield

Global dairy prices fell from nine-month highs hit the previous month at a fortnightly auction held early on Wednesday as strong supply muted buyers' willingness to pay for key products such as whole milk powder.

The GDT Price Index dipped 1.3pc to an average selling price of $3,487 per tonne in the auction held in the early hours of the morning, after jumping 1.9pc at the previous auction.

That pointed to possible wobbles in a recovery that had seen New Zealand dairy company Fonterra Co-operative Group Ltd, lift its forecast payout prices to farmers just the previous month.            

Prices for whole milk powder (WMP), the most widely traded product at the auction, dropped 1.1pc as buyers were faced with stronger supply, largely due to production in New Zealand, the world's largest dairy exporter, picking up after being hampered by bad weather earlier in the year.pc

Fonterra had said on Tuesday that its total New Zealand milk production in April rose 3, driven largely by more favourable weather conditions.            

 "Buyers did purchase more WMP than they did at the May 15 event, but they were unwilling to pay more for it," said Amy Castleton, dairy analyst at AgriHQ.

A total of 21,580 tonnes was sold at the latest auction, an increase of 18.8 percent from the previous one.

The auction results can affect the New Zealand dollar as the dairy sector generates more than 7pc of the nation's gross domestic product.

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The kiwi currency dipped as low as $0.6999 in the wake of the auction, but later made back most of its losses to trade around $0.7024.

Online Editors