#TGD: Second price drop at Fonterra auction

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Prices at Fonterra’s latest online dairy auction have continued to fall, due to increased production thanks to more rain and the high US dollar.
The GlobalDairyTrade’s trade-weighted price index overnight fell 2.1 per cent compared with the last sale two weeks ago, the second consecutive price drop after a nine-auction run of gains for the basket of dairy products.
The average winning price was US$4549 ($5534) a tonne, down from US$4597.
Maximum supply, the measure of how much product Fonterra has for sale, rose to 18,985 tonnes from 17,630 tonnes, with a total of 17,637 tonnes sold.
BNZ market strategist Mike Jones said he had expected a larger drop-off and the 2.1 per cent fall represented a solid result.
Dairy prices were under pressure from a large increase in volumes, caused by improved grass growth, and the recent strength of the US dollar, Jones said.
BNZ expected prices to continue falling during the coming months.
Prices would correct from the high levels they had been at recently, but with higher volumes the price drops were unlikely to damage returns, he said.
«Prices currently aren’t dropping at the rate they went up – they are still very high,» he said, adding they were still about 70 per cent higher than a year ago.
In the latest auction six of the 10 product categories fell and three were not traded.
The biggest decline was butter which fell 12.4 per cent. The next-biggest drop was for butter milk powder, which was down 5.1 per cent. Whole milk powder, the largest category by volume, fell 1.7 per cent.
The only category to gain was rennet casein, which was up 3.7 per cent.
In last night’s auction 154 bidders took part, with 91 winning bidders and 811 qualified to bid.
 
Source: Stuff

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