6 Jan 2016

Dairy prices down in year's first auction

10:03 am on 6 January 2016

Prices have fallen in the first GlobalDairyTrade auction of the year.

Friesian cow.

Prices remain short of the break-even range for farmers. Photo: RNZ / Alexander Robertson

The average price fell 1.6 percent overnight to $US2458 a tonne.

It follows a near 2 percent rise at the previous auction in mid-December.

The important whole milk powder price fell 4.4 percent to $US2210 a tonne.

It was the first price fall in three auctions.

Prices remain well short of the break-even range for farmers, who need about $US3000 a tonne.

Waikato University Professor of Agri-Business Jacqueline Rowarth said if the prices fell again, Fonterra would have to declare another decrease in milk price for farmers.

The falling market resulted in farmers reducing their supply.

"Before Christmas, 100,000 more cows than usual have been sent to the works, so we're down in terms of milking cows," she said.

"Supply will be going down. In general economic understanding that might have an effect on the milk price, that it should go up, but we see it hasn't this year."

Fonterra and market commentators are expecting prices to improve in the second half of the dairy season, as stockpiles of product in the key Chinese market are reduced and New Zealand supplies are hit by drought.

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