21 Oct 2015

Dairy price drop 'a hiccup' in the market

3:55 pm on 21 October 2015

A dairy analyst says a small drop in international dairy prices is a hickup in the market, and prices are expected to continue to rise.

In the overnight Global Dairy Trade auction the overall price index eased by about three percent and the price of New Zealand's major export, whole milk powder, dropped 4.6 percent to US$2,694 a tonne.

Prices had risen in four consecutive auctions from record lows in the middle of August, which gave farmers a glimmer of hope that Fonterra would lift its forecast payout of $4.62 per kilo of milk solids.

The co-operative was expected to review its forecast at its annual meeting next month.

AgriHQ analyst Susan Kilsby said the fall came as a surprise.

"Essentially the market is just taking a little bit of a breather because prices went up so quickly," she said.

"When prices were a little bit lower we were seeing a bit of extra demand from buyers and that's sort of eased back a bit now as prices have got higher and most buyers are reasonably well covered.

"Sellers' expectations in terms of prices have also gone up, so we're seeing a little bit of a slow down in buying activity as a result of that."

Prices were starting to plateau, and

NZX dairy futures market a fortnight ago was expecting whole milk powder prices to reach $3000 a tonne by November, but now wasn't expecting them to reach that level until May, as prices started to plateau.

The $3000 a tonne mark equaled a farmgate price of about $5.50 a kg of milk solids, which was above the break even point for most farmers.