Slight decline in dairy prices

Dairy prices nudged down a fraction at the latest Global Dairy Trade (GDT) auction by an average 0.6 per cent across all products to reach US$3593 a tonne.

For the first time this year the price of whole milk powder fell - by 0.8 per cent to US$3232 a tonne.

ASB analyst Nathan Penny said the drop in prices was expected, with milk futures indicating a decline of about 2 per cent.

This result was consistent with the ASB’s 2017-18 farmgate forecast of $6.50 per kilogram of milksolids. Fonterra’s forecast is $6.40/kg, but this is expected to be reviewed in several weeks at the same time the half year results are announced.

Milk fat prices were a touch weaker, with butter and anhydrous milk fat (AMF) prices falling one per cent and 3.2 per cent respectively.

Skim milk prices (SMP) prices bucked the trend, lifting 5.5 per cent, while cheddar and casein also posted gains.

‘‘The biggest auction surprise was the jump in SMP prices. When we weight the auction results on a milk price basis, prices actually posted a small lift,’’ Penny said.

‘‘From here, we expect prices to ease further through to the end of the season.

‘‘We expect New Zealand production to improve on the back of the increased rainfall. In turn, this improved production should put modest downward pressure on prices.’’

United States analyst HighGround Dairy described the difference in price between the UHT grade of SMP and the medium heat grade of SMP as ‘‘an almost unfathomable spread’’