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Global Dairy Prices Fall For Third Time In A Row, Despite Signs Of Robust Demand

Published on Sep 20 2018 8:30 AM in Fresh Produce tagged: Trending Posts / Dairy / New Zealand / dairy prices

Global Dairy Prices Fall For Third Time In A Row, Despite Signs Of Robust Demand

Global dairy prices fell at the third fortnightly auction in a row early Wednesday as New Zealand's supply of key products ramped up.

The GDT Price Index dipped 1.3% to an average selling price of $2,934 per tonne, after falling 0.7% at the previous sale.

The drop was led by a 3.5% fall in cheddar prices and a 1.8% easing in values for whole milk powder (WMP), the most widely traded item.

Fall In WMP Prices

However, that was less than the 4.7% fall in WMP prices expected by futures markets, as New Zealand dairy producer Fonterra had signaled increased supply after recovering from bad weather that had hampered production at the start of the year.

"WMP prices were therefore expected to come down due to the supply pressure," said Amy Castleton, dairy analyst at AgriHQ.

The amount of WMP sold lifted 5%, led by North Asian buyers, suggesting strong demand and limiting downward price pressure even as supply expanded.

In total, 39,143 tonnes were sold at the latest auction, up 0.9% from the previous one, the auction platform said.

Ongoing weakness in dairy prices prompted New Zealand's Synlait Milk on Thursday to trim its forecast payout to farmers to NZ$6.75 per kilogram from NZ$7.00 per kilogram set earlier, in the wake of a similar payout cut by Fonterra.

Auction Can Affect The New Zealand Dollar

The auction results can affect the New Zealand dollar as the dairy sector generates more than 7% of the nation's gross domestic product.

The Kiwi currency edged down in the hours after the auction from around $0.6598 to $0.6575 but by morning had made up most of those losses to trade around $0.6592.

GDT Events is owned by New Zealand's Fonterra, the world's largest dairy exporter, but operates independently from the parent company.

US-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction.

A number of companies, including Dairy America and Murray Goulburn, use the platform to sell milk powder and other dairy products.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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