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Dairy prices dipped slightly in this week's GlobalDairyTrade auction.
Overall prices fell 0.6% and key whole milk powder prices slipped 0.8%. Milk fat prices were a touch weaker. Butter and anhydrous milk fat prices fell 1% and 3.2% respectively.
Skim milk powder prices bucked the trend, lifting 5.5%, while cheddar and casein also posted price gains.
The fall was not quite as steep as that indicated by futures pricing before the auction, which had indicated a WMP price fall around 2%, ASB senior rural economist Nathan Penny said.
The biggest auction surprise was the jump in SMP prices. When the auction results were weighted on a milk price basis, prices actually posted a small lift, he said.
Westpac senior economist Anne Boniface said production in January was down almost 7% on a year earlier (on a milk solids basis) and down 1% for the season to January.
Since then, conditions had improved in many parts of the country and over the entire season, the bank expected nationwide domestic production to be down around 1%.
The bank expected dairy prices to soften further in the coming months, as global supply continued to grow.
The ANZ commodity price index lifted 2.8% in February. The lift was fairly broad-based, although the dairy group provided the major thrust with a 6% gain.
That jump in dairy prices was driven by concerns about a potential early finish to the New Zealand season and cooler weather in Europe, ANZ senior economist Phil Borkin said.