Prices slipped 1.3 per cent at Fonterra's latest online auction of milk powder, holding near a four-month high and keeping intact one of the pillars of New Zealand's terms of trade.
The gDT-TWI, an index of the four products on offer - whole milk powder, skim milk powder, butter milk
powder and anhydrous milk fat - fell to US$3,591 per metric tonne, according to the globalDairyTrade website. Prices for whole milk powder, which made up 67 per cent of product on offer at 22,000 tonnes, fell 2.1 per cent.
This week's sale is the first since Fonterra held its forecast pay-out to farmers at $6.60 a kilogram of milk solids while warning of more price volatility as supply and demand in global markets move more into balance.
It comes after the ANZ Commodity Price Index for September, published this week, rose 2.9 per cent, closing in on the all-time high reached in May. Dairy prices rose 6 per cent.
A 1.3 per cent decline "is pretty steady," said Robin Clements, senior economist at UBS New Zealand. "Trading partner growth is expected to taper off a little bit but it is still about trend. The long-term trend for soft commodities is reasonably firm - that's good for the terms of trade and for the economy."
Fonterra achieved a record 2.1 million tonnes of dairy exports for the year ended July 31, helped by demand from China and Russia.
Prices for skim milk powder fell 0.9 per cent while butter milk powder rose 2.8 per cent. Anhydrous milk fat rose 1.4 per cent.
There were 122 bidders participating in the sale, with 80 winners after 10 rounds.
The next auction is being held on October 20.
