2 Jul 2009

On-line auction milk powder prices down 3%

11:28 am on 2 July 2009

Whole milk powder prices have fallen by 3% since last month in Fonterra's latest on-line dairy auction on Wednesday night.

The company says the result reflects good customer interest, but also a continued wariness about paying too much in an uncertain environment.

The average price dropped to $US1829 per metric tonne, compared with a month ago. It follows a 12% decline in June.

Global dairy trade managing director Kelvin Wickham says consumers appear to be taking a conservative approach to purchasing as they try to second-guess when an inevitable increase in demand and prices will occur.

The auction reflects a weak demand for milk powder in Europe and the United States and a large international stockpile of milk solids.

Fonterra Shareholders Council chair Blue Read told Morning Report that demand has not dropped - just the price.

He said nobody likes to see the price come down, but it's very early in the season so things could change "quite dramatically" during the year.

The fall comes two months after Fonterra lowered its forecast payout to dairy farmers by 12.5% to $4.55 per kg of milk solids for the 2009/10 season, because of weaker commodity prices and a higher New Zealand dollar.