Dairy prices plunge to six-year low

Dairy product prices continued their slide in the latest GlobalDairyTrade auction, weakening to the lowest level in six years.

The GDT average winning prices dropped 5.9 per cent to $US2,276 ($NZ3,356) from $US2,409 at the previous auction two weeks ago.

It is the lowest level since July 2009 and the eighth successive fall.

Some 33,200 tonnes of product was sold, the highest volume since the January 6 auction and up from 24,047 tonnes of product two weeks ago.

The AgriHQ 2015-16 Farmgate Milk Price decreased 45 cents to $5.05 per kilogram milksolids following the GDT auction.

That compares with Fonterra's 2015-16 milk price forecast of $5.25/kgMS.

"The NZX Futures market anticipated whole milk powder prices would fall overnight. However the market underestimated the size of the fall," AgriHQ dairy analyst Susan Kilsby said in a note.

Whole milk powder slipped 10.8 per cent to $US2,054 a tonne, butter milk powder shed 8.1 per cent and skim milk powder declined 5.8 per cent.

"The last time milk powder prices were this low was six years ago," Ms Kilsby said. "At that time demand was limited due to the Global Financial Crisis."

And the outlook is not favourable.

"It will be difficult for dairy commodity prices to increase significantly in the coming months as the quantity of milk powder available on GDT will rise with New Zealand's seasonal increase in production," Ms Kilsby said.

Cheddar dropped 4.9 per cent, rennet casein fell 4.1 per cent and butter slipped 0.3 per cent.

In contrast, anhydrous milk fat rose 1.6 per cent to $US2,855 a tonne.

The New Zealand dollar last traded at 67.52 US cents at about 1:55pm in New York, compared with 68.00 US cents at 5pm in Wellington the previous day.

Tumbling dairy prices are expected to start impacting on the whole economy as farmers tighten spending. Source: 1 NEWS