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Fonterra milk prices still healthy despite 2.5% fall

Wednesday 20th October 2010

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Milk prices fell 2.5% at Fonterra Cooperative Group's latest online auction, though are still at a relatively healthy level above US$3,500 a tonne.  

The trade-weighted price of whole milk powder, skim milk powder, butter milk powder and anhydrous milk fat fell to US$3,506 a tonne from US$3,591, the lowest since August.

That comes after American production per cow improved last month, though from a smaller cow muster, according to a US Department of Agriculture report.  

"A two or three percent movement here or there is not something that's going to be material - US$3,500 a tonne is still a pretty good level," said Khoon Goh, head of market economics and strategy at ANZ New Zealand.

The biggest decline came in skim milk powder, which dropped 4.7% to an average US$3,072 a tonne. Whole milk powder fell 1.1% to US$3,484, while anhydrous milk fat dropped 1.2% to US$5,196 and butter milk powder declined 1.1% to US$3,033.

The first contract fell 4% on a trade-weighted basis.  The auction attracted 116 bidders, with 89 winning bids after 10 rounds.  

Today's event was the first since the NZX dairy futures market launched, which has closed two successful trades of the first October 2010 contract at the listing price of US$3,525 a tonne.

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