14 Apr 2015

Further dairy price falls likely

6:23 am on 14 April 2015

Analysts and commentators are widely predicting a further fall in dairy prices at the Global Dairy Trade auction to be held on Wednesday night.

Dairy farmer in a milking shed

Low dairy prices could open the door for new sharemilkers. Photo: AFP

And falls of up to 60 percent have been predicted in the longer term, as more milk comes onto the world market.

But AgriHQ's dairy analyst, Susan Kilsby, thinks that prediction is going too far.

She said the NZX dairy futures market, which has provided a reliable guide to price trends in recent auctions, indicates that whole milk prices could fall by a further 5 percent this week and skim milk powder by up to 8 percent.

But she did not think the milk supply surge would be as great as some were forecasting.

"The end of the New Zealand production season has been a little stronger than anticipated earlier in the year and we've had the (milk) quotas coming off in the European Union, so there's a little uncertainty about how much milk will come out of that market.

"At the moment there's still plenty of supply of dairy products globally, relative to the demand, but we are seeing demand starting to build in some regions, particularly some poorer regions like parts of North Africa, which only buy dairy products when they are relatively cheap.

"And on the supply side, I don't think we'll see a massive growth in milk supply because farm gate milk prices are low or coming back across the globe, so there's just not the incentive there to expand the milk supply."

Ms Kilsby said she expected dairy supply and demand to come back into balance within about six months, allowing prices to pick up again.

Get the RNZ app

for ad-free news and current affairs