Fonterra milk powder prices extend slide in online auction

By Paul McBeth

Wednesday 4th February 2009

The price of milk powder in the latest Fonterra Cooperative Group online auction saw the average price plummet a further 8.2%.

The average price of milk powder has now fallen 58% to US$1851 per metric ton since the introduction of the controversial auctions last July. The world's largest dairy exporter last week revised its forecast payout for the 2008-2009 season down 90 NZ cents to $5.10 per kilogram, 35% lower than the record $7.90 per kg paid to farmers last season.

Dairy products made up 22% of New Zealand's $42.5 billion of exports in the 12 months ended October 31, and the weaker prices will add to the drag on the domestic economy as farmers find themselves with less cash to spend. The New Zealand economy fell into recession midway through last year for the first time since 1999.

Australian farmers accused the online auctions of wiping 40% from dairy prices in the latter half of the year, while some Fonterra shareholders claimed the auction's transparency hindered the cooperative's ability to influence markets.

The ANZ January commodity price index out later today will give a good indication to where the prices of raw materials produced in New Zealand are heading.

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