Milk powder prices dip slightly: Fonterra

IAIN McGREGOR/Waikato Times

DAIRY DIPS: World dairy prices have slippd slightly and are enjoying a period of relative stability according to Fonterra.

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World dairy prices are enjoying a period of relative stability says Fonterra, after its global auction Tuesday overnight showed a slight dip in average milk powder prices.

The average price of whole milk powder was down 3.4 per cent on last month’s event, at US$3790, while the skim milk powder average price dipped 6.2 per cent to US$3462.

Anhydrous milk fat prices rose 5.9 per cent to US$5324.

Manager of Fonterra’s auction platform GlobalDairy Trade, Paul Grave said the slight price drop possibly reflects increasing supply out of the European Union, and easing market concerns about supply.

Supply is still the market driver, but with New Zealand milk flows soon to start again, the euro weakening against the US dollar making EU product more attractive on the global market, and the US likely to increase supply in response to attractive prices,  concern would ease, Mr Grave said.

"A couple of months ago people were very concerned about where they were going to get their supplies from.  New Zealand starting again (soon) is probably the light at the end of the tunnel."

Buyers have been reluctant to commit to long-term contracts, he said.

"People are still quite risk averse. They’re not sure what the world will look like in January and February 2011, which is where we are currently selling some of this product into."

Drought in New Zealand had contributed to the world supply shortage.

"Our drought (effect) is cutting in now. We’re reliant on what stock we hold now and we’ve probably got less (than this time last year)," Mr Grave said

Fonterra, the world’s biggest dairy exporter and New Zealand’s biggest company, offers around 500,000 tonnes of product – about 22 per cent of its total 2009 production of 2.3 million tonnes - on its monthly internet auctions.  Volumes have climbed steadily since the auction started in mid-2008 with around 180,000 tonnes.

- © Fairfax NZ News