Milk price change window closing

The window of opportunity for changes to this season's Fonterra milk price and dividend is closing, economists say.

Dairy prices posted a modest 1.2% fall in this week's GlobalDairyTrade auction, although remained high.

Products in Fonterra's cheese and casein stream, as well as butter and anhydrous milk fat, continued to lose some of the gains made from mid to late 2013, ASB rural economist Nathan Penny said.

He had previously said that a sustained rise in the cheese and casein stream prices would open up the possibility of a lift to Fonterra's milk price or dividend, but the latest falls reduced that possibility, he said.

Demand for New Zealand milk powder remained very strong at prices around $US5000 ($NZ6027) a metric tonne. Forward contract prices indicated ongoing support for prices over 2014.

On the back of continued strong demand, ASB had ''pencilled in'' a farmgate milk price of $7.80 for the 2015 season.

The main caveat to that was the assumption that Fonterra ''gives back next season much of what it is taking away this season'', Mr Penny said.

Fonterra yesterday announced a $32 million expansion of its slice-on-slice cheese capacity at its Eltham site in Taranaki, in response to fast-growing demand throughout Australasia, Asia and the Middle East.

Slice-on-slice cheese was used extensively in quick service restaurants.

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