* Global dairy prices fall 5 percent
* Whole milk powder down 7.3 percent
* Fonterra's output increase weighs on prices
(Adds details, background)
By Leika Kihara
WELLINGTON, July 4 (Reuters) - Global dairy prices fell at
the biggest pace this year at a fortnightly auction held early
on Wednesday, as strong supply muted what buyers were willing to
pay for key products.
The GDT Price Index dropped 5 percent, with an average
selling price of $3,232 per tonne, in the auction held in the
early hours of the morning, after slipping 1.2 percent at the
previous sale.
The results came after New Zealand milk producer Fonterra
said on Tuesday its total milk production in the
country increased 6 percent in May due to favourable autumn
weather conditions.
Fonterra's announcement "appears to have given the market
the jitters," said Amy Castleton, analyst at AgriHQ.
Whole milk powder, the most widely traded product, fell 7.3
percent to $2,905 per tonne.
A total of 26,519 tonnes was sold at the latest auction, an
increase of 22.6 percent from the previous one, the auction
platform said on its website.
The New Zealand dollar barely reacted to Wednesday's auction
and hovered around $0.6750, as market participants focused on
intensifying trade tensions between the United States and China.
The auction results can affect the New Zealand dollar
at times as the dairy sector generates more than 7 percent of
the nation's gross domestic product.
The New Zealand milk co-operative, which is owned by about
10,500 farmers, controls nearly a third of the world dairy
trade.
GDT Events is owned by New Zealand's Fonterra Co-operative
Group Ltd , but operates independently from the dairy
giant.
U.S.-listed CRA International Inc is the trading
manager for the Global Dairy Trade auction. The next auction is
scheduled for July 17.
A number of companies, including Dairy America and Murray
Goulburn , use the platform to sell milk powder and
other dairy products.
(Reporting by Charlotte Greenfield
Editing by James Dalgleish)