Whole Milk Powder leads fall in dairy prices

ASB senior rural economist Nathan Penny. Photo / Supplied

Dairy prices posted their first fall since early March in this week's GlobalDairyTrade auction, led by a 3.3% drop in the whole milk powder price.

Overall prices fell by 0.8% although skim milk powder rose 1.4% and milk fat products continued to reach new highs.

Both anhydrous milk fat and butter set fresh auction record highs of $US6886 ($NZ9532) a tonne and $5768 respectively. Butter prices had now more than doubled over the past year.

ASB senior rural economist Nathan Penny said the WMP fall could be put down to better-than-expected New Zealand production.

Dairy markets had pushed WMP prices about 16% higher over March, April and May as they factored in the possibility of disrupted New Zealand supply.

However, if anything, production had held up. In April, New Zealand production was 6.8% higher than in April 2016.

Milk fat demand was very high although milk fat prices were likely to retreat from those record highs, particularly as new season production ramped up in the spring, he said.

Westpac economist Shyamal Maharaj said the bank's $6.50 forecast milk price for this season allowed for some pullback in WMP prices over the rest of the year.

Milk production among the major exporting nations had risen again this year, as prices had moved back above break-even levels.

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