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Milk powder prices may drop 7pc at auction

NZ Newswire logoNZ Newswire 3/03/2017 Tina Morrison

The price of milk powder, New Zealand's key commodity export, is expected to fall on the GlobalDairyTrade platform next week after improved weather conditions prompted Fonterra to increase the amount of product it's offering.

Whole milk powder futures for March last traded at US$2,980 a tonne on the NZX, 5.7 per cent below the equivalent price at the last GDT, while skim milk powder futures fell 12 per cent to US$2,290 a tonne.

That implies milk powder prices will fall about 7 per cent at Tuesday night's auction, said AgriHQ senior dairy analyst Susan Kilsby.

Fonterra, the world's largest dairy exporter, said on Friday it would lift the volume of whole milk powder and skim milk powder offered in coming auctions on the GDT platform by about 25,000 tonnes as more favourable weather meant it collected more milk than expected from its farmer suppliers.

The dairy giant lifted the volume of skim milk powder for next week's auction by 49 per cent for product that ships in May and June, and increased the volume of whole milk powder by 6.1 per cent for product shipped from April through June.

"Fonterra yesterday said it would put out more product than the market was expecting," said AgriHQ's Ms Kilsby.

"That reflects that this season's milk production is now expected to be more than what was previously accounted for."

She noted that strong global demand for milk fat products such as butter and AMF meant Fonterra was likely to sell those products to customers outside of the GDT, whereas weaker demand for skim milk powder meant it would be sold on the auction platform.

Fonterra last week kept its forecast farmgate payout to its farmer suppliers at $6 per kilogram of milk solids for this season.

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