Dairy prices appear to have pulled out of their nose dive but economists say it is too early to tell whether the market has stabilised after yesterday's GlobalDairyTrade (GDT) auction.
The main GDT price index eased by 0.6 per cent, with an average winning price of US$3000 a tonne, but economists said New Zealand farmers would have taken heart from a 3.4 per cent gain to US$2804 a tonne for wholemilk powder.
Overall prices stand 39.2 per cent lower than a year ago and wholemilk prices are down 45.4 per cent. Since the peak in February of this year, prices are down 41 per cent.
"There are perhaps the first signs of a consolidation but they are pretty tentative," said ANZ Bank rural economist Con Williams.
Early this month, Fonterra cut its 2014/15 farmgate milk price forecast to $6 a kg of milksolids, down from a previous forecast of $7. Prices may need to improve if the $6/kg price is to be achieved and ASB Bank expects the forecast to fall to $5.80 a kg, going on recent trends.
ANZ's Williams said a shift in the farmgate price from the high $5-mark to around the mid $5s would represent a "material increase" in the number of farmers who would not be able to turn a profit, after interest costs.
- additional reporting BusinessDesk