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Dairy prices down further


Wednesday 20th July 2011

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Dairy commodity prices fell further at Fonterra's overnight online auction, with the GlobalDairyTrade trade weighted index dropping 5.1 percent, following falls of 6.7 percent and 2.6 percent at the two previous auctions in the past month.

The average winning price at the latest event was $US3796 ($NZ4437) a tonne, down from $US4017 previously.

BNZ currency strategist Mike Burrowes said milk prices were now down 13.5 percent since early June and down 20 percent from early March.

The recent declines were starting to question Fonterra's payout forecast, Burrowes said.

"Probably not enough to cause a downward move, but we would not want to see global prices ease much further and/or the currency push even higher. Keep an eye on both."

Fonterra made an initial forecast of its payout for the just started production season to farmer shareholders of between $7.15 and $7.25, comprising a milk payment of $6.75 a kilo of milk solids and an additional 40c to 50c from operational activities.

That compares with a record payout of $8 to $8.10 for the season just ended, with Fonterra saying it expects returns this season to be dented by the strong New Zealand dollar and lower dairy prices.

At the overnight auction the trade weighted price for anhydrous milk fat fell 12.5 percent with the average winning price at $US4614, skim milk powder fell 5.2 percent with the average winning price at $US3488, while whole milk powder dropped 4 percent with the price at $US3475.

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