13 Oct 2014

Dairy commodity prices remain weak

1:59 pm on 13 October 2014

International dairy commodity prices have continued to weaken since the last Global Dairy Trade auction when the average price dropped by more than 7 percent.

The NZX Agrifax dairy price index has recorded declines for both milk powders and casein, with the largest drop coming from whole milk powder.

The weighted average price for that is now 30 percent lower than at the start of the season in July, and 39 percent lower than a year ago.

Agricultural market analyst with NZX Agrifax Tim Leong said with the next auction due on Wednesday the outlook for dairy products remains weak.

"Supply across the globe continues to show growth, while Chinese demand is still reported to be slow, and this has been compounded by the uncertainty caused by the Russian import ban which has only pushed prices down further."

He said in response to that, Fonterra has reduced the volumes of dairy product it is putting up for this week's GDT auction cutting whole milk powder by 1600 tonnes.

Agrifax said in response to the drop in demand and prices, Fonterra has also reduced the amounts of wholemilk powder it expects to offer for auction by 7 percent over the next year. That amounts to a reduction of 38,400 tonnes.