Global Dairy Prices Dip Overnight

   By Rebecca Howard 
 

WELLINGTON, New Zealand--International dairy prices fell in the overnight GlobalDairyTrade Internet-based auction, an international trading platform established by New Zealand's Fonterra Co-Operative Group Ltd. (FCG.NZ).

The GDT Price Index, which covers a variety of products and contract periods in the auction, fell 1.8% compared with the prior auction on May 6, with the average selling price being $3,873. Dairy prices are down more than 20% since early February.

The slide in prices "will be closely watched by the Reserve Bank of New Zealand," said BNZ FX Strategist Kymberly Martin. "It will be increasingly uncomfortable" with a high New Zealand dollar on a trade weighted basis "while NZ commodity prices come off the boil."

The GDT Price Index is widely considered a market reference price for dairy products. Products on offer include whole milk powder, skim milk powder, butter, cheese and anhydrous milk fat. The result tends to impact the New Zealand dollar as dairy forms the backbone of the economy, representing around 25% of exports. The New Zealand dollar is trading at US$0.8576 early in New Zealand versus US$0.8620 late Tuesday, ahead of the auction, as "the weaker GDT auction kept the NZD under pressure," ANZ Bank said.

The average selling price for whole-milk powder--which makes up the bulk of the auction--was $3,877 a metric ton, down 1.1% compared to the prior auction.

Participants in the auction include Fonterra, which produces about a third of the world's traded dairy products, Europe-based Arla Foods and Murray Goulburn Co-Operative of Australia and U.S.-based DairyAmerica Inc, as well as India's Amul and Euroserum, a unit of Sodiaal International.

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