Fonterra dairy auction prices fall again

Last updated 07:54 06/11/2013

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A second consecutive drop in the price of products at last night's Fonterra commodity auction could signal global dairy supply is on the rise.

The GlobalDairyTrade's trade-weighted price index overnight dropped 1.8 per cent compared with the last sale.

The average winning price was down to US$4797 ($5781) a tonne from US$4888 a tonne.

Maximum supply, the measure of how much product Fonterra has for sale, rose to 51,874 tonnes from 45,556, with a total of 49,304 sold.

BNZ currency strategist Mike Jones said the drop was likely to reflect an improving global milk supply.

A rise in global dairy supply had been anticipated for some time and the drop in prices at last night's auction was the first sign this was happening, he said.

"It's a result that's very much within the bounds of expectations."

However, New Zealand dairy commodity prices were still 41 per cent higher than they were a year ago, Jones said.

The most recent drops in dairy prices would not have an effect on the Fonterra payout, he said.

Prices would have to fall by at least 10 per cent before anyone started to panic, he said, adding that markets expected prices to hold up rather than collapse.

Whole milk powder fell 3.7 per cent.

Jones said this was likely to have had an effect on the overall drop in the dairy commodity price index as whole milk powder was the largest category by volume.

In the latest auction two of the nine product categories fell.

Butter led the decliners down 7 per cent compared with the last sale.

Anhydrous milk fat was up 6.9 per cent and milk protein concentrate gained 4.6 per cent.

In last night's auction 199 bidders took part, with 129 winning bidders, and 820 qualified to bid.

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