Increase in New Zealand milk supply and trade tension gives dairy market the 'jitters'
- Global dairy prices fall 5%
- Whole milk powder down 7.3%
- Fonterra's output increase weighs on prices
Global dairy prices fell at the biggest pace this year at a fortnightly auction held early on Wednesday, as strong supply muted what buyers were willing to pay for key products.
The GDT Price Index dropped 5pc, with an average selling price of $3,232 per tonne, in the auction held in the early hours of the morning, after slipping 1.2pc at the previous sale.
The results came after New Zealand milk producer Fonterra said on Tuesday its total milk production in the country increased 6pc in May due to favourable autumn weather conditions.
Fonterra's announcement "appears to have given the market the jitters," said Amy Castleton, analyst at AgriHQ. Whole milk powder, the most widely traded product, fell 7.3pc to $2,905 per tonne.
Economist with ASB bank in New Zealand, Nathan Penny said dairy markets are nervous and the fall in dairy auction prices reflected this nervousness.
However he said the nervousness stems from the increase in trade tensions between the US and China.
"Indeed, the tensions are now spilling over to actual tariff increases.
"For example, Chinese tariff increases on US exports, scheduled for July 7, include dairy and other agricultural products.