Prices at Fonterra's latest online dairy auction fell overnight, snapping a three-strong run of gains due to added supply coming online.
The GDT-TWI Price Index fell 2 per cent, with an average winning price of US$3290 per metric tonne. That followed a 0.7 per cent gain in the previous sale two weeks ago.
Kymberly Martin, a market strategist at BNZ said the decline appeared to be the result of unexpected jump in supply available at the sale, although she stressed the drop in price was within her margin of fluctuation.
Maximum Supply, or the measure of how much dairy product Fonterra has for sale, was 53,360 metric tonnes. A total of 52,596 tonnes was sold.
"Combined with the positive result seen in yesterday's ANZ commodity price index (up 1 per cent in November) this confirms our view that NZ commodity prices are broadly consolidating recent gains," she said.
The already closely watched GDT sale is likely to receive even higher scrutiny after the float of the Fonterra Shareholders Fund, a pool of freely tradeable units which give investors exposure to the dairy giant's profits via dividends.
Some market commentators believe this sets New Zealand's biggest company up for a conflict of interest, with farmer shareholders wanting higher farm gate milk prices, while outside investors will want lower dairy prices - seen as an input cost – to maximise margins.
At the current level, ANZ believes the dairy price is supportive of a $5.50 per kilogram of milk solids farm gate pay out.
At last night's auction, four of the eight products categories showed price declines, two weren't traded, and two rose.
Whole milk powder, the largest product category by volume, fell 3.5 per cent. Anhydrous milk fat led gainers, with prices up 3.7 per cent.
The auction saw 178 participants out of a 729 qualified bidders take part, with 141 winning bids.
Do you agree with claims that Fonterra is transferring wealth from farmers to unit holders and to the dividend in contradiction of its milk price manual?Related story: Lower milk price 'to boost dividend'