* Global diary prices fall 2.6%
* Ramped up supply weighs on prices
* Risks to demand due to U.S.-China trade conflict -analyst (Recasts, adds market reaction, analyst comment)
WELLINGTON, Aug 7 (Reuters) - Global dairy prices fell at a fortnightly auction, largely reversing a previous lift, and dragged down by rising supply.
The GDT Price Index dipped 2.6%, with an average selling price of $3,253 per tonne, having risen 2.7% at the previous sale.
Prices for whole milk powder, the most widely traded item, fell 1.7%.
The volume of product sold soared on the back of more supply from the world’s largest dairy exporter, New Zealand, which weighed on prices.
A total of 34,969 tonnes was sold at the latest auction, an increase of 39.9% from the previous one.
“This is fairly normal at this time of year as NZ milk supplies start to come online,” said Robert Gibson, dairy analyst at NZX.
Demand was particularly strong from North Asia. However analysts warned that the trade conflict between the United States and China was likely to weigh on the Chinese currency, posing a risk to dairy prices for the rest of the year.
“We have warned that Chinese demand is a key swing factor in the outlook for dairy prices over the coming year....recent developments suggest the outlook for Chinese consumer demand and global growth has deteriorated,” said Anne Boniface, senior economist at Westpac Bank.
The auction results can affect the New Zealand dollar as the dairy sector generates more than 7% of the nation’s gross domestic product.
The currency fell overnight from around $0.6550 to around $0.6525.
GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.
The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.
U.S.-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction. A number of companies, including Dairy America and Murray Goulburn, use the platform to sell milk powder and other dairy products
The auctions are held twice a month, with the next one scheduled for Aug. 20.
Reporting by Charlotte Greenfield; Editing by Lisa Shumaker