Prices at Fonterra's latest online dairy auction continued to ease following last week's 5.9 per cent plunge, with global growth concerns and a stronger US dollar weighing on demand.
The prices Fonterra gets at the online dairy auctions determine the payout it passes on to farmers. That, in turn, is closely watched as a lead into the rural economy, a sector that has remained largely subdued since the global financial crisis.
The GDT-TWI Price Index fell 0.9 per cent compared with the last sale two weeks ago, with an average winning price of US$2756 per metric tonne.
"The result was certainly consistent with the recent firming in the US dollar, but is a little disappointing in the context of rising prices for other soft commodities," said Mike Jones, a market strategist at Bank of New Zealand.
Only three of the eight product categories recorded prices declines, led by a 5.8 per cent drop in whole milk powder, followed by a 2.9 per cent fall in cheddar, and a 1.8 per cent easing in rennet casein.
Butter prices saw the biggest gain at the sale, up 7.2 per cent on two weeks ago, followed by a 5.2 per cent increase in skim milk powder.
"We suspect the risks are for higher prices in the next few auctions reflecting worsening US drought conditions and soaring global grains prices," Jones said.
Global commodity prices fell 1.1 per cent to 295.64 overnight, as measured by the Thomson Reuters Jefferies CRB Index, which tracks a mixed basket of 19 soft and hard commodities.
The sales saw 155 participants out of a 692 qualified bidders take part, with 114 winning bids.
- © Fairfax NZ News
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