Prices for dairy fall by 5.2%

Dairy prices fell 5.2% in this week's GlobalDairyTrade (GDT) auction, volumes having spiked as a result of New Zealand late-season milk production exceeding expectations.

Benchmark whole milk powder fell 5.7%, while anhydrous milk fat and casein prices recorded falls of more than 10%.

ASB economists said buyers were ''filling their boots'' with the extra late-season milk.

The price movements appeared temporary, in line with the temporary boost to supply, and they could not see any signs of lower demand at this stage.

The extra volumes, and lower prices, were allowing buyers to bring forward their purchases, but it appeared they were not confident the fall in prices was permanent.

Prices for whole milk powder contracts for delivery in two to four months had fallen to about $US4400 ($NZ5112) but, further out, prices were higher at about $4700 for the contracts for delivery in five to six months.

While whole milk powder prices dipped at this week's auction, skim milk prices fell by much less, indicating the extra late-season milk from New Zealand was the dominant factor, rather than any tail-off in demand or a sustained rise in global supply.

Fonterra was the dominant whole milk powder producer, while the skim milk powder market was much more competitive globally.

Westpac senior economist Anne Boniface said currency markets often took a keen interest in outturns from dairy prices but there had been little discernible reaction to the last couple of GDT results.

Instead, the currency had tracked higher in March. Consequently, prices had fallen about 12% when measured in New Zealand dollar terms over the last couple of auctions, she said.

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