Dairy prices to fall, but not milk

Butter and cheese prices are expected to drop 4 to 8 per cent next month. Photo / Greg Bowker

The price of butter and cheese will drop next month in line with falling international dairy prices - but milk will stay the same.

Weakening demand in China has caused international dairy commodity prices to drop, although Fonterra claimed not by a sufficient amount to make milk prices fall.

"At this stage there are no changes planned to fresh milk prices, but if the international milk prices drop significantly we will of course flow these decreases on to consumers," Fonterra Brands managing director Peter McClure said.

Public anger at steadily climbing milk prices saw Fonterra freeze wholesale liquid milk prices in February for the remainder of the year.

Recently the international price for milk powder has dropped from $5500 a tonne to $4100.

But Fonterra said the freeze had kept the price of milk artificially low and effectively cost the company $4 million since its introduction.

The freeze did not apply to manufactured dairy products because Fonterra said they were based on global commodity prices which it pays on the same basis as everyone else.

The Commerce Commission will decide later this month whether an inquiry into retail milk prices is necessary.

Fonterra put up its prices for cheese and butter by between 4 and 8 per cent in April, and consumers could see prices drop by a similar amount next month.