Fonterra milk price falls again

Fonterra's latest farmgate milk price forecast for 2015/6 is already under downward pressure after dairy prices fell for the third time in a row at the latest GlobalDairyTrade auction, the GDT price index dropping by 7.4% since the last sale.

Whole milk powder prices - which are key to determining Fonterra's farmgate milk price, fell by 10.4% to US$1,952 a tonne this morning.

Prices for another key product - skim milk powder - dropped by 2.2% to US$1792 tonne.

Dairy prices have been weak so far this year as the market still suffers from an excess of supply over demand.

Fonterra last week cut its farmgate milk price forecast for the 2015/6 season to $4.15 a kg of milksolids from a previous forecast of $4.60 a kg in response to weak international prices.

The average break-even point for most farmers has been estimated at $5.40 kg.

Key factors driving dairy demand are declining international oil prices which have weakened the spending power of countries reliant on oil revenues, economic uncertainty in developing economies and a slow recovery of dairy imports into China.

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