21 Nov 2018

Dairy prices forecast to keep falling until next year

1:01 pm on 21 November 2018

The latest Global Dairy Auction saw average dairy prices slip 3.5 percent to $US2727 a tonne.

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The price of butter fell 9.6 percent, according to the latest Global Dairy Auction. Photo: 123rf

Benchmark whole-milk powder price fell 1.8 percent, while skim milk powder fell 1.6 percent and butter fell 9.6 percent.

The fall came a day after analysts forecast such a drop.

After the announcement, NZX dairy analyst Amy Castleton said wholemilk volumes were at a peak, with October production volumes at their highest level ever, up 6.5 percent on last year.

"We do expect prices to continue declining for a little bit longer," she said.

"New Zealand milk production has been very good ... there is plenty of product out there and plenty of volume from New Zealand at present.

"However, milk production is starting to slip back in Europe and the United States so there is a little bit of support [in future] for commodity prices."

Ms Castleton said prices might revive a bit next year.

Nathan Penny from ASB said New Zealand was at the peak of its production now.

"From here, we have started on the homeward stretch, so there should be some recovery in prices as we get further into the season," he said.

"But for now, there is a lot of milk on our hands and we are struggling to find a market for it."

Mr Penny said he had revised downwards the forecast price from $6.25 to $6 a kilogramme of milk solids.

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