Dairy auction price fall not a concern

Northland dairy farmers are not panicking despite a slight reduction in the Global Dairy Trade auction.

Northland dairy farmers are not worried at a slight fall in prices at the Global Dairy Trade auction while still holding hopes of a final payout in the mid to high $6 per kilogram of milk solids.

Dairy product prices dropped at the Global Dairy Trade auction, sliding for a second consecutive auction, as whole milk powder prices unexpectedly sank amid increased volume on offer.

The GDT price index fell 3.9 per cent to US$3463 ($4937), down from US$3656 at the previous auction two weeks ago. Whole milk powder dropped 7.7 per cent to US$3294 a tonne.

Federated Farmers Northland dairy chairman, Ashley Cullen, said a decrease in GDT price index could be a case of buyers hedging their bets or testing the waters.

"I don't think there's anything to worry about as far as milk prices are concerned," he said.

"Production is down around the country and it's just a case of buyers and suppliers being a little bit weary."

Mr Cullen said the market was still volatile and, coupled with a lack of rain, the situation for Northland dairy farmers this year could be difficult.

In early December, wholemilk powder prices rose 4.9 per cent to US$3593 a tonne.

In November, Fonterra increased its 2016/17 farmgate milk price by 75 cents to $6/kgMS.

Combined with the forecast earnings per share range of 50c to 60c, the total payout available to Fonterra farmers in the current season is forecast to be $6.50 to $6.60/kgMS before retentions.

A $6/kgMS payout will earn Northland dairy farmers $540 million, $6.50 will rake in $585m, while $6.60 will yield $594m.