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Dairy product prices fall 2.4 percent in GDT auction; little sign of taint disruption

Wednesday 7th August 2013

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Prices of dairy products fell in the latest GlobalDairyTrade auction, while the volume sold jumped to a record, suggesting little if any reaction to Fonterra Cooperative Group's whey protein contamination scare.

The GDT Price Index, previously known as the GDT-TWI Price Index, fell 2.4 percent compared to the last sale two weeks ago. The average winning price was US$4,847 a tonne, compared to US$4,828 a tonne in the previous sale, when prices had the biggest increase in four months.

The total volume of dairy products sold at the latest auction jumped to 60,587 tonnes, the biggest on record for the GDT site, from 37,948 tonnes two weeks ago. The overnight sale was seen as a key measure of market sentiment in the wake of news that Fonterra had found the bacteria Clostridium, which can cause botulism, in three batches of whey protein concentrate. No tainted product found its way into the GDT sales.

"Prior to the contamination scare we had expected prices to fall over the second half of 2013," Westpac Banking Corp economist Nathan Penny said in a preview to the sale. "Trade-weighted prices rose unexpectedly by around 5% in the previous auction - we were already expecting payback before the contamination scare."

The New Zealand dollar edged higher after the sale results were published, to trade recently at 79.06 US cents from 78.66 cents immediately before. The trade-weighted index was last at 74.74, up from about 74.50. The kiwi had initially dropped on Monday following the weekend's news from Fonterra.

The average winning price of skim milk powder fell 3 percent to US$4,451 a tonne. Fonterra competes with Amul, Arla and Dairy America for sales of SMP. In the latest sale, no Fonterra Contract 1 SMP, for delivery in September, was sold, while Dairy America made Contract 1 sales across all four variants of the product it offered.

Whole milk powder, the biggest product by volume, fell 1.6 percent to US$5,021 a tonne, having jumped 7.7 percent in the last auction two weeks ago.

The price of anhydrous milk fat fell 4.9 percent to US$4,612 a tonne and butter milk powder gained 0.4 percent to US$4,641 a tonne, with again no September contracts sold. Butter dropped 5.5 percent to US$3,499 a tonne.

Cheddar fell 4.4 percent to US$4,335 a tonne. Lactose didn't trade and milk protein concentrate traded at US$7,751 a tonne. Rennet casein rose 1.2 percent to $9,904 a tonne.

There were 132 winning bidders over 10 rounds. There were 199 participating bidders out of a total number of qualified bidders of 855.

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