20 Dec 2017

Analysts warn of worse as milk price falls

6:56 am on 20 December 2017

Dairy prices are at their lowest point in more than a year after a drop at the latest auction.

FOR WATER TAX story - Generic cow

Photo: RNZ / Rebekah Parsons-King

The global dairy index fell 3.9 percent overnight to an average price of $US2969 ($NZ4250) per tonne.

All products fell including the important whole milk powder price which, at $US2755 ($NZ3944), is the lowest price since October last year.

Volumes sold rose 0.3 percent compared with the previous auction a fortnight ago.

Prices have been lumpy in the recent months and Fonterra cut its forecast payout to dairy farmers as a result earlier this month.

The forecast now sits at $6.40 per kilo of milk solids, still at a level where farmers can break even, but some analysts think there might be some more downward pressure on the forecast.

"It's not looking like it's going to be a great season," AgriHQ dairy analyst Susan Kilsby told RNZ earlier this month.

"It's getting dry, so production is also slightly down, and then with the milk price coming back your average-sized farm with this downwards revision in price you've sort of taken $60,000 to $70,000 out of their income with this revision."

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