October 3, 2017 / 8:35 PM / a year ago

UPDATE 1-Global dairy prices slump, but low production points to improving outlook

 (Re-casts, adds analyst quote, market reaction)
    By Charlotte Greenfield
    WELLINGTON, Oct 4 (Reuters) - Global dairy prices slumped at
an auction early on Wednesday, posting their biggest loss in
more than six months.
    The Global Dairy Trade Price Index dipped 2.4 percent, with
an average selling price of $3,223 per tonne, at the fortnightly
auction. The index had risen 0.9 pct at the previous sale.
    The result suggested a recent rally in dairy prices in the
second quarter was running out of steam. 
    Nevertheless, analysts suspected low production in New
Zealand, that world's top source of dairy exports, meant that
prices could pick up again as supply waned.
    "Despite the dip in prices overnight, we see potential for
overall prices, particularly for WMP (whole milk powder), to
push higher over coming months," ASB economists said in a
research note.
    "NZ weather has been poor (very wet) and production is
reportedly back on last season," they added.
    Prices for whole milk powder sank by 2.7 percent, at odds
with futures markets that had been pricing in a 5.8 percent
rise, according to analysts. 
    The New Zealand dollar          fell 0.4 percent to a
one-month low of $0.7160 after the auction.
    The auction results can affect the New Zealand dollar
because the dairy sector generates more than 7 percent of the
nation's gross domestic product.
    A total of 37,990 tonnes was sold at the latest auction, an
increase of 11.4 percent from the previous one, the auction
platform said.
    GDT Events is owned by New Zealand’s Fonterra Co-operative
Group Ltd         , but operates independently from the dairy
    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 October 17.

 (Reporting by Charlotte Greenfield, editing by Larry King)
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