4 Nov 2015

Lower milk production will support dairy prices - economist

3:15 pm on 4 November 2015

An economist says lower milk production in New Zealand should support dairy prices over the rest of the season.

Milk at Pak n Save Kilbirnie.

Milk at Pak n Save Kilbirnie. Photo: RNZ / Alexander Robertson

At the latest overnight auction, prices fell 7.4 percent to $US2569 a tonne.

That marks the second consecutive fall.

All products put up for auction experienced price drops, with the key whole milk powder price falling 8 percent to $US2,453 a tonne.

That's well below the break-even range for farmers, who need about $3,000 a tonne or more.

ASB's rural economist Nathan Penny said with production falling in September, prices should hold steady or increase.

"Production is down around 4 percent... and over 7 percent on a year ago," he said.

Mr Penny said ASB was sticking with its forecast of $5 a kilo of milk solids payout for the current season.

Fonterra's forecast is a touch shy on that at $4.60.