Dairy prices continue to fall; production growth expected

NEW Zealand production would be a key factor for the direction of dairy prices for the rest of the season, ASB senior rural economist Nathan Penny said yesterday.

The weather had been favourable so far and early season production numbers had been positive.

ASB anticipated production growth of 2% compared to last season.

More than 2% production growth was likely to lead to additional price weakness, and below price strength, he said.

ASB’s $6.50 a kilogram of milk solids price forecast was also based on its 2% production growth forecast.

Mr Penny was commenting on the latest GlobalDairyTrade (GDT) auction where whole milk powder continued its slide.

The GDT index fell 1.3% from the auction two weeks ago. The average price was $US2934 ($NZ4452) a tonne compared with $US2980 a tonne. A total 34,143 tonnes of product was sold, up from 38,111 tonnes.

Whole milk powder prices fell 1.8% to $US2769 a tonne.

Fonterra last week lifted its 12month whole milk powder offer volumes by 20,450 tonnes. The increases would occur through the October, November and December GDT auctions.

Mr Penny noted in annual terms, prices were nearly 15% below this time last year.

‘‘For now though, the weaker New Zealand dollar is doing enough to offset the largest part of this fall.’’

Over the same period, prices in New Zealand dollar terms were a ‘‘modest’’ 3.7% lower.

Overall prices had now fallen in seven out of the last eight auctions and were down 14.1% in the same period.

The price weakness yesterday was broadbased and five of the six products monitored by ASB posted falls.