Dairy product prices drop after two straight gains

"This is more of a short-term market reaction to the change in Fonterra's milk forecast than the start of anything more serious" – Susan Kilsby

Dairy product prices fell at the Global Dairy Trade auction, stemming two straight gains, amid increased supply.

The GDT price index fell 3.2% to $US3474, down from $US3537 at the previous auction two weeks ago. Some 20,479 tonnes of product was sold, down from 21,273 at the previous auction.

Whole milk powder slid 3.7% to $US3189 a tonne.

Last week Auckland-based Fonterra, the world's biggest dairy exporter, said it would more product available for sale on GDT after it upgraded its milk intake expectations for the season.

"Many buyers will be aware that milk intakes in New Zealand are starting to improve following poor production during the spring," AgriHQ dairy analyst Susan Kilsby says.

"The dairy markets, however, are closely balanced so it does not take much to tip the balance one way or other with small changes in supply volumes," Ms Kilsby says. “The outlook remains positive, though.”

"Despite the weak result overnight the underlying market fundamentals are generally supportive for Oceania sourced product," according to Ms Kilsby.

"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."

At the latest GDT auction, buttermilk powder sank 12.9% to $US2090 a tonne, while rennet casein dropped 5.8 % to $US6135 a tonne.

Cheddar retreated 5.3% to $US3590 a tonne, while skim milk powder declined 3.8% to $US2574 a tonne.

Anhydrous milk fat declined 1.3% to $US5693 a tonne.

Bucking the trend, lactose climbed 6.8% to $US966 a tonne, while butter inched 0.2% higher to $US4598 a tonne.

The dollar last traded at 71.63USc at about noon in New York, compared with 71.90USc at 5pm in Wellington the previous day.

There were 114 winning bidders from 149 participating at the 12-round auction. The number of qualified bidders was 530, the same as at the previous auction.

(BusinessDesk)