Fonterra's Dairy Trade auction slides again

Cows tuck into winter fodder at Kelso near a disused farm building. Photo: Stephen Jaquiery

The latest 3.5% decline in Fonterra's fortnightly Global Dairy Trade auction brings the cumulative fall in the average price to 25% since May.

The fall was the 16th out of the past 19 auctions and calls into question whether Fonterra can maintain its current forecast payout of $6.25 to $6.50 a kilogram of milk solids, or cut it further.

The overall GDT price index dropped 3.5% from a fortnight ago, with the average price falling from $US2851 ($NZ4199) a tonne to $US2727 ($NZ4018).

Craigs Investment Partners broker Peter McIntyre said the headline index fall of 3.5% brought the cumulative decline in average pricing to 25% since May.

The key product group, whole milk powder, fell 1.8% to its lowest point since August 2016.

''And it's expected to fall further on strong milk supply,'' Mr McIntyre said.

Craigs head of wealth research Mark Lister said the trends in both dairy pricing and the renewed strength in the kiwi could see the actual Fonterra payout settle closer to $6 or $6.25.

''Dairy hasn't been going well. It's just been steadily drifting lower and now we've got the New Zealand dollar going in the other direction as well,'' Mr Lister told BusinessDesk.

Whole milk powder declined 1.8% to $US2599 a tonne, but butter and anhydrous milk fat both plunged more than 9%.

Butter fell 9.6% to $US3637 a tonne and anhydrous milk fat shed 9.4% to sell for $US4577 a tonne.

Rennet casein dropped 4.5% to $US5067 a tonne and skim milk powder fell 1.6% to $US1965.

Bucking the trend, cheddar eked out a 0.2% gain to $US3252 a tonne, while lactose rose 1.1% to $US920 a tonne.