6 Oct 2011

Global dairy prices predicted to be near lowest

7:15 am on 6 October 2011

An economist says global dairy prices may be close to their low point, which is encouraging given other commodity prices continue to fall.

Dairy prices have fallen at the last eight of Fonterra's online auctions. The most recent fall, of 1.6% to an average selling price of $US3449 per metric tonne, takes the average selling price to a 14-month low.

But BNZ economist Doug Steel says the latest decline was more muted than expected given the deterioration in global sentiment.

He says dairy is still holding up relatively well compared to many other markets and commodity prices, and the weaker New Zealand dollar will be support of export revenues from the dairy sector for some time to come.

Mr Steel says despite the recent price falls, Fonterra's forecast payout for this season, and the next, are looking a little more certain.

He says even though product prices in US dollar terms have been drifting lower over the last few auctions, in New Zealand dollar terms they have been rising since early August which is supportive for the dairy payout forecast, not only for this season but next season as well.