2 Jul 2015

Dairy prices continue downward trend

12:49 pm on 2 July 2015

Global dairy prices are continuing to track lower.

Milk at Pak n Save Kilbirnie.

Milk at Pak n Save Kilbirnie. Photo: RNZ / Alexander Robertson

At the latest fortnightly auction, the average price dropped 5.9 percent to $US2,276 a tonne.

That marks the eighth consecutive fall.

The Dairy Price Index has not risen since March.

A key price to farmers, whole milk powder, slipped 10.8 percent to $US2,054, while skim milk powder dropped 5.8 percent to $US1,875.

Falling dairy prices led Fonterra to cut its forecast payout for the season just gone to $4.40 a kilo of milk solids, while it set a new season forecast of $5.25.

Analysts estimate dairy farmers need at least $5.50 to $6 a kilo to break even.

Analyst with AgriHQ Susan Kilsby said a drop in the price for whole milk powder was expected, but the rate of the fall came as a surprise.

She said it would be difficult for dairy commodity prices to increase significantly in the coming months, as the amount of milk powder available for the fortnightly auctions will increase with the country's seasonal rise in production.

She said as New Zealand's production begins to increase in the next few months, and more product was put up for auction, prices were unlikely to bounce back.

Labour's Grant Robertson said the collapsing dairy prices would strip $13 billion dollars out of the economy.

He said that affected not just the Government's coffers, but incomes in regional New Zealand.

Mr Robertson said the Government has failed to diversify the economy despite the obvious fact that riding the wave of commodity prices was never going to be sustainable.

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