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Dairy product prices tumble 8.9%, biggest drop since August 2012

Dairy product prices had the biggest drop in almost 20 months at Fonterra Cooperative Group's latest GlobalDairyTrade auction as whole milk powder fell to its lowest level in more than a year.

The GDT price index dropped 8.9 percent to US$4,124 a tonne from US$4,563 per tonne two weeks ago, the fourth straight decline and the lowest since August 2012. Some 39,653 tonnes of product was sold, up from 39,008 tonnes two weeks ago.

Soaring prices of global dairy products helped Fonterra lift sales in its first half by 21 percent, including record shipments to China in December, although profit tumbled 53 percent as the high price of milk, which is based on reference products including milk powder, drove up its input costs for products such as casein and cheese. The company said last month it sees no let-up in the second half because factory constraints have led to an unfavourable product mix.

In the latest GDT auction, rennet casein rose 5.5 percent to US$11,105 a tonne while cheddar fell 3.5 percent to US$4,438 a tonne. Whole milk powder, the biggest product sold by volume, fell 8.4 percent to US$4,033, its biggest decline since May last year.

Skim milk powder prices dropped 9.6 percent to US$4,126 a tonne and butter declined 11 percent to US$4,040 a tonne.

Butter milk powder prices tumbled 15 percent to US$4,211 a tonne and milk protein concentrate declined 4.3 percent to US$8,436 a tonne. Lactose wasn't offered at the event.

There were 167 winning bidders out of 201 participating bidders at the auction over 11 rounds. The number of qualified bidders rose to 756 from 747 at the last auction.

(BusinessDesk)

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Comments and questions
8

So with dairy prices dropping so much (and so consistently) and mortgage interest rates on the rise, at what stage does dairy farming profitability become an issue in NZ, especially considering the amount of land converted (and still being converted) to its use?

"China is a sleeping giant, let her sleep, for when she wakes she will move the dairy industry".

But that is what the wool industry thought.....

A perfect time to get out of any sector depending on milking

What other industry in this Nation contributes $35million per day, each day to our economy? Dairy critics need to do their homework

So it is OK to depend so much on China that takes such a commodity-based approach that will depress rather than lift (or even sustain) prices? Meanwhile we are helping China develop its own dairy industry! Do you really believe Michael that all of this will mean the dairy industry's contribution to NZ will be the same in five years?

Sounds like we have all our eggs in one basket.

When the grass stops growing on the dairy farms in New Zealand it will start growing through the asphalt on the streets of our cities. You have been warned.