16 Mar 2011

Global dairy price drop unlikely to reach consumer

8:17 pm on 16 March 2011

Federated Farmers says a slump in global dairy prices is unlikely to be reflected at the supermarket checkout, because a domestic price freeze is already in place.

After rising steadily for 12 weeks, dairy prices fell in Fonterra's fortnightly auction overnight on Tuesday night, dropping 8.2% across all products globally.

Whole milk powder prices led the decline, falling 11.4% to $US4105 ($5600) a tonne.

The chief economist at ASB Bank, Nick Tuffley, says the disaster in Japan may be partly to blame for the drop, with other agricultural commodities also falling on Tuesday.

Despite the drop, Federated Farmers says supermarket prices are unlikely to follow suit.

It says Fonterra's freeze on wholesale domestic milk prices has affected its profit.