Dairy farmers should begin preparing for a potentially lower milk price forecast for the 2012-13 season, Federated Farmers dairy chairman Willy Leferink warned yesterday.
Mr Leferink's warning followed dairy products prices' biggest fall since July 2010 in Fonterra Group's latest GlobalDairyTrade auction, pushing the price index below its 10-year average.
The GDT-TWI Price Index fell 9.9% compared to the sale two weeks ago. The average winning price dropped to $US2983 ($NZ3655) a tonne. Prices fell for all six products on offer and across all contracts.
The Real GDT-TWI, which is deflated by a measure of the US consumer price index, fell below its 10-year average for the first time since 2009.
The drop reflected the abundance of milk produced around the world, Mr Leferink said.
"Almost ideal growing conditions around most of New Zealand this season has seen a record amount of milk production and a corresponding increase in products on the market platform."
There was also more milk coming from the United States and Europe, meaning there was an abundance of milk products going through GDT, he said.
In April, there had been a 10% increase in volume on that platform. A price drop was not unexpected.
"We will have to watch what happens over the next few months, but with Fonterra already having revised down its payment by 45c to $6.30 per kg of milk solids, New Zealand dairy farmers should begin preparing for a potentially lower milk price forecast for the 2012-13 season," he said.
The fall in prices comes as commodity prices hold near their lowest levels this year, based on the Thomson Reuters/Jefferies CRB Commodity Index of 19 globally traded commodities.
The index most recently rose 0.4% to 302.09. Commodity prices have softened on signs demand might slow in China, the world's fastest-growing major economy.
There were 118 winning bidders over eight rounds, out of 134 participating. The number of qualified bidders rose to 610 from 603.
