17 Feb 2016

Dairy prices down again in latest auction

12:58 pm on 17 February 2016

Dairy prices have fallen for the fourth consecutive time this year, although not by as much this time.

In the latest Global Dairy Trade auction, overnight, the average price fell by 2.8 percent to $US2235 a tonne.

At the previous twice-monthly auction the average price dropped by 7 percent..

The whole milk powder price on which Fonterra bases its payout to farmers fell by 3.7 percent to $US1890 a tonne, compared with a 10.4 percent drop at the previous auction.

no caption

Graphic: GlobalDairyTrade Ltd

Whole milk powder is now at its lowest price since August.

However the latest fall was lower than had been anticipated by analysts who had predicted a drop of up to 10 percent for whole milk powder - which would have put Fonterra's forecast milk price under continued pressure.

In January, Fonterra lowered its farmgate milk price recently been to $4.15 per kilogram of milk solids in light of weak global demand and an over supply of milk.

Three other New Zealand dairy companies, Synlait, Westland Milk Products and Open Country, reduced forecast payouts to between $4 and $4.45 - under the $5 figure most farmers need to break even.

In the latest auction, butter, cheddar and skim milk powder all fell in price between 1 percent and 5 percent.

The dairy price drop is likely to put further pressure on the Reserve Bank to consider a cut in the Official Cash Rate from its present record low of 2.5 percent.

But some economists argue a robust domestic economy will stay the central bank's hand.

Get the RNZ app

for ad-free news and current affairs