1 Apr 2015

Expectations of another drop in dairy prices

2:55 pm on 1 April 2015

Dairy analysts are expecting prices in the global dairy trade auction to fall again in tonight's auction.

At the last one a fortnight ago, prices for the key commodity, whole milk powder, dropped by 9.6 percent to US$2,928 a tonne.

Fonterra's recent announcement that it is increasing its supply in the auction has Agri HQ's dairy analyst Susan Kilsby predicting another drop in prices.

"As soon as they released their volume data we did see a reaction on the NZX Dairy Futures Market with prices coming back considerably, I mean across last week prices were generally down by 6-10 percent.

"We're also seeing prices in other markets in the EU and the US back as well and essentially New Zealand prices for skim milk powder are still higher than what we're seeing out of Europe and the US so certainly not a lot of chance for prices to move up, more likely to head in the other direction, which is what we're really expecting at the GDT auction."

Ms Kilsby said another uncertainty for the dairy industry was the removal of the European Union milk quota system, which would be lifted today.

The quota had been in place for more than 30 years and was brought in to manage prices by restricting supply.