8 Mar 2017

Dairy prices fall in latest auction

8:11 am on 8 March 2017

Dairy prices have fallen to their lowest level in five months in the latest auction.

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Photo: 123RF

The average price at the overnight auction fell 6.3 percent to US$3512 a tonne.

It was the second price fall in a row and pushes the global dairy trade index to its lowest level since mid-October last year.

The key commodity, whole milk powder - which influences the payout to dairy farmers - dropped 12.4 percent to $2782 a tonne.

That is just below the break-even point for many farmers.

Most other products sold at the auction also fell in price, notably skim milk powder and cheese.

AgriHQ analyst Susan Kilsby called the latest auction dismal.

"To see prices falling again before the market has fully recovered will be a disappointment to farmers. While one poor result doesn't have a huge impact on the milk price it will be difficult for prices to recover quickly while there is surplus product available," Ms Kilsby said.

"Last night's result shows just how tightly balanced the market is - there just isn't the depth of demand in the market to absorb any extra product at the moment."

The fall had been indicated by future prices on the stock exchange.

Last week Fonterra held its forecast payout to farmers at $6 a kilo of milk solids, and said it was confident the market would gradually improve.

However, it also said falls in production, which had been pushing up prices, were not expected to be as severe as first estimated.

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