Global dairy prices fell at an auction held early on Wednesday, on signals that milk production would be higher than expected.
Average prices dipped 3.2 percent at the Global Dairy Trade auction, which takes place twice a month, with an average selling price of $3,474 per ton.
Prices for whole milk powder fell 3.7 percent while skim milk powder fell 3.8 percent.
“Despite the weak result overnight the underlying market fundamentals are generally supportive,” Susan Kilsby, dairy analyst at AgriHQ, said.
Dairy giant Fonterra last week said that it would collect 5 percent less milk in the 2016-17 season, meaning supply would be higher than its previously forecast 7 percent drop.
“We see this as more of a short-term market reaction to the change in Fonterra’s milk forecast than the start of anything more serious,” Kilsby added.
Farmers and analysts had been nervous that a 50 percent rebound in prices during 2016 after two years of falls could be temporary after the prices were dented at two auctions in the past three months.
Dairy prices fell 3.9 percent in the first auction of the year on Jan. 3, but then edged higher for the next two auctions.
A total of 20,479 tons was sold at the latest auction, falling 3.7 percent from the previous one.
Global Dairy Trade is owned by New Zealand co-operative Fonterra but operates independently from the dairy giant. A number of companies, including Dairy America and Murray Goulburn , use the platform to sell milk powder and other dairy products.
The auction results can affect the New Zealand dollar as the dairy sector generates more than 7 percent of the nation’s gross domestic product. The Kiwi edged down 0.3 percent to a one-week low $0.7166 after the results, though the fall was also caused buy the strong U.S. dollar.
The next auction is scheduled for March 7.
Source: Reuters
