20 Jun 2013

Dairy prices expected to fall - economist

7:08 am on 20 June 2013

BNZ economist Doug Steel expects that while global dairy prices will remain high compared to what's been achieved, they will begin to fall.

The average winning price was $US4598 per metric tonne in Fonterra's latest global dairy auction, with whole milk powder prices rising 2.2% and butter up 4.7%.

Prices for cheddar and butter milk powder both declined.

Volumes were also down slightly for the first time since April, falling 2% to 23,700 metric tonnes.

While the jump in prices was not much, Steel said it was against expectations that they might continue to fall.

Prices are 58% higher now than what they were a year ago.

Mr Steel said a lack of supply because of the drought has pushed prices much higher than they were a year ago and that may last a little longer, but prices might come down a little when the New Zealand supply comes back on stream in spring.

He said dairy prices are still at very good levels in terms of an historical context which is good for dairy payout and a good income boost to the country.