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Dairy prices fall as increased supply halts industry recovery
December 20, 2016 / 10:11 PM / in 10 months

Dairy prices fall as increased supply halts industry recovery

SYDNEY, Dec 21 (Reuters) - International milk prices fell
for the first time in more than two months in an auction early
on Wednesday as a recent recovery in the dairy industry
unexpectedly reversed course.
    The Global Dairy Index fell 0.5 percent, with an average
selling price of $3,656 per tonne.
    The fall is the first fortnightly slide since Oct. 4, ending
a rally that has seen prices rise some 20 percent.
    "The index dropped 0.5 percent largely due to whole milk
powder prices softening," Susan Kilsby, dairy analyst at AgriHQ,
said in a research note.
    "Fonterra increased the volume of whole milk powder on offer
... there was not quite enough demand to soak up the additional
product offered."
    A total of 22,321 tonnes was sold, a decrease of 0.7 percent
from the previous auction, Fonterra said.
    The fall was a blow for dairy farmers who have been squeezed
after prices for dairy ingredients like milk and butter fell
sharply for more than two years by a global oversupply.
    Dairy analysts had expected a continued recovery in prices
as a global supply surplus is eroded amid stronger international
demand.
    The auction results can affect the New Zealand dollar 
as the dairy sector generates more than 7 percent of the
country's gross domestic product.
    The kiwi was trading around $0.6912, or down 0.23 percent,
after the auction.

 (Reporting by Colin Packham, editing by G Crosse)

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