Global Dairy Auction: Wholemilk powder prices continue decline

Wholemilk powder prices continued to decline while other products showed signs of improvement at this morning's GlobalDairyTrade auction - the last before Fonterra revises its farmgate milk price forecast for the current season.

The average winning price was US$2513 a tonne and prices overall were down 1.1 per cent since the last auction in mid November.

The price of whole milk powder - the most important product group for New Zealand producers - dropped by 7.1 per cent from the last sale to US$2229 a tonne.

Fonterra has said wholemilk powder prices would need to reach US$3500 a tonne by next March if its current farmgate milkprice of $5.30 a kg is to be achieved.

Economists had expected prices to be flat, at best.

Fonterra's board is set to meet early next week and bank economists expect the co-operative dairy giant to revise its current $5.30 per kg of milksolids forecast for 2014/15 to sub $5.00 levels.

Aside from whole milk, prices were firm for all the other products offered at the auction.

Anhydrous milk fat prices improved by 9 per cent, butter by 7.3 per cent, butter milk powder by 8.8 per cent, cheddar by 5.2 per cent, rennet casein by 9.3 per cent and skim milk powder by 5.7 per cent.

Prices have fallen by close to 50 per cent since February, driven mostly by excess supply.
Fonterra's milk production in the season to date is up by about 4 per cent on this time last year, and production in the United States and Europe has been similarly strong, so the increase in supply had prevented prices from improving.

Last week, Westland Milk Products, New Zealand's second biggest dairy cooperative after Fonterra, cut its forecast milk payout for the second time in four months, blaming global over-supply.

Economists have said dairy farmers should be able to weather a low payout for the current season, thanks to last year's high milk price, but two poor seasons in a row would be a different story.

See more details of the overnight auction here.