Business

Global dairy prices drop, again

13:42 pm on 5 March 2014

Global dairy prices have fallen for the second consecutive time in Fonterra's latest fortnightly auction.

The GDT Price Index dropped 4 percent, with an average selling price of $US4,794 per tonne.

More milk was also sold, with volumes up 18.8 percent and more than 41,000 tonnes sold.

The price of whole milk powder fell 5.7 percent and skim milk powder fell 3.9 percent but the trend of price rises in value added products such as cheddar and butter continued.

These products have proved problematic for Fonterra, and the dairy giant wrote off $157 million from its inventory in its first quarter because it cost it more to produce value-added products than to sell them.

The dairy co-operative said at the time this was because of rising prices for its raw commodities, which resulted in its margins on specialised ingredients and consumer-branded products, such as cheese, being squeezed.

Fonterra slice-on-slice cheese production for export. Photo: FONTERRA

Hayley Moynihan, director of dairy research for New Zealand and Asia at Rabobank says supply has jumped since last year.

"For the first time in almost 12 months buyers have actually got increased product availability to choose from in the global market ... hence the slight easing in prices."

Despite the latest fall, the average selling price is 13.7 percent higher than the $US4,216 per tonne of a year ago, which was near the peak of a drought when prices spiked.