Global dairy prices take fourth tumble

Prices fell by 1.7 per cent to US$3222 a tonne at the latest global dairy trade (GDT) auction, suggesting lower prices are ‘‘here to stay’’, Westpac economist Anne Boniface says.

It follows a drop of 5 per cent two weeks ago, the largest decrease seen in the index this year.

However, the price for New Zealand’s key export, whole milk powder (WMP), recovered slightly by 1.5 per cent to US$2973, while skim milk powder (SMP) was also up 0.8 per cent.

Butter prices slipped 8.1 per cent, anhydrous milkfat (AMF) was down 5.2 per cent, cheddar fell 3.3 per cent and casein by 9.5 per cent.

Boniface said the fourth decline in a row suggested lower prices were trending down.

‘‘The fact we didn’t see a strong rebound suggests lower prices are here to stay. The fall has come about from a combination of a softening demand in China and global trade tensions.’’

Westpac is forecasting a farmgate payout for the season of $6.40 per kilogram of milksolids, significantly lower than Fonterra’s opening forecast of $7.

ASB analyst Nathan Penny said while there had been a 9 per cent fall in the past two months, there were signs the market was stabilising. ‘‘The 9 per cent overall fall in the past two months is a modest move by historical auction standards where 20 per cent is more akin to significant move.’’

Dairy market nervousness was likely to continue in the short term.