Dairy prices tipped to bottom out at auction

Skim milk powder's average price fell 7.5 per cent to US$2048 a tonne. Photo / File

The last GlobalDairyTrade auction for the season is tomorrow and dairy analysts say indications are that prices may be about to bottom out.

At the last sale, on May 6, the GDT price index dropped by 3.5 per cent from the previous sale in April.

AgriHQ dairy analyst Susan Kilsby said the futures market was not offering any clear direction on where prices were heading this time, but she expected the market to flatten.

The key dairy nations in Europe continued to produce more milk, which was bad news for milk powder producers, but butter prices looked to be improving, she said.

ANZ rural economist Con Williams said prices might have bottomed for now. He said an improvement in the key product - whole milk powder - of up to 5 per cent might be possible.

"Any bounce in prices would of course be a positive, but remember whole milk powder prices are trading around US$2400 [$3229] a tonne and we need a large lift to eventuate before the 2015/16 dairy payout will look reasonable," he said.

He expects Fonterra, in its next forecasts on May 27, to issue a prediction of $5 to $5.25 per kg of milksolids for the season ahead.

At the last sale, the price of whole milk powder - the key determinant for Fonterra's farmgate milk price - fell by 1.8 per cent to US$2386 a tonne.

Skim milk powder's average price fell 7.5 per cent to US$2048 a tonne.