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UPDATE 1-Dairy prices fall for second consecutive auction -NZ's Fonterra
November 3, 2015 / 8:07 PM / 2 years ago

UPDATE 1-Dairy prices fall for second consecutive auction -NZ's Fonterra

(Adds detail)
    WELLINGTON, Nov 4 (Reuters) - Global dairy prices fell for
the second consecutive auction, further reversing a bounce in
prices as supply contracted over the last few months.
    The benchmark GlobalDairy Trade (GDT) price index fell 7.4
percent to $2,569 at fortnightly auctions held by New Zealand
dairy exporter Fonterra late on Tuesday.
    "Dairy auction result overnight was particularly weak," ANZ
analysts said in a research note. 
    The fall came despite slowing New Zealand dairy supply. 
    "We interpret this contradiction as markets overdoing the
recent surge in prices. Potentially buyers expect that demand is
subdued enough and/or inventories are high enough to cover the
production falls," ASB analysts said in a research note. 
    The kiwi dollar edged down to its lowest level in
four days at $0.6652, before regaining some losses to rise
    Prices for whole milk powder, the most traded product at the
auction, fell 8 percent to $2,243 per tonne. 
    Prices for skim milk powder also lost 8 percent, falling to
$2,018 per tonne. Butter milk powder veered down 9.4 percent and
cheddar prices lost 4.6 percent.    
    After rising steadily since 2008 to scale record highs in
2013, global dairy prices sharply dropped because of slowing
economic in growth in China and global oversupply of milk
products. China is New Zealand's top export market and the
world's largest importer of whole milk powder. 
    The GDT index bounced back slightly in August as slowing
supply pushed up prices, offering hope that the dairy market was
    Lower dairy prices this year reduced Fonterra's costs and
helped boost the cooperative's profit, but weighed heavily on
the company's farmer-shareholders whose incomes have been
slashed in the last year. 
    The New Zealand milk co-operative, which is owned by about
10,500 farmers, controls nearly a third of the world dairy
    The dairy sector generates more than 7 percent of New
Zealand's gross domestic product. 
    The results of the auction could affect the central bank's
decision on whether to cut interest rates, as analysts widely
expect, when it meets next month. 
    The Reserve Bank of New Zealand cited a recovery in global
dairy prices as an encouraging recent development when it held
interest rates at 2.75 percent at a meeting last month. 

 (Reporting by Charlotte Greenfield in WELLINGTON and Bengaluru
Commodities Desk; editing by Adrian Croft)

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