Consumers are likely to get some relief from high domestic dairy product prices as international prices continue to plummet.
Three surveys out this week confirm a sharp correction in international dairy prices, prompting Fonterra Brands to predict lower dairy consumer prices by Christmas.
Fonterra Brands managing director Peter McClure could not say by how much prices would fall, saying that depended on where international commodity values settled and the exchange rate.
This week's ANZ Commodity price index revealed international dairy prices fell 7.9% for the month, the largest monthly fall in 21 years, following a 4.9% decline in August.
That easing was confirmed by Fonterra's Thursday night Internet-based GlobalDairyTrade for wholemilk powder, with prices 11.8% lower than the previous trade in early September.
Thursday's prices averaged $US2,917 (NZ4,388) a tonne and ranged from $US2,830 to $US3,075 a tonne.
Fonterra's commercial director of GlobalTrade, Guy Roper, said the prices were not unexpected given the unprecedented high values reached last year.
"The spreading global financial crisis and concurrent economic slowdown is curbing demand for all commodities and dairy is no exception."
The CBA New Zealand commodity price indices also reflected dairy's international price slump, with the index falling more than 25% in US dollar terms in a year.
Commenting on dairy prices for CBA, Prof William Bailey, the chairman of the Department of Agriculture at Western Illinois University, said milk powder prices from Oceania and Europe had fallen more than 30% since the middle of this year.
He expected added pressure on international markets as last year's drought-curbed production in New Zealand and Australia returned to normal.
Mr McClure said global prices remained "well above traditional levels," but they were softening.
"While we do not set retail prices, the prices we charge our customers will fall and we expect that to flow through to the shopping aisle."
Statistics New Zealand figures reveal that in the last year the price of cheese rose 65%, butter 88% and fresh milk 12.4%.
Earlier this year Mr McClure said domestic consumers were already being subsidised, with Fonterra Brands, which bought its milk off its parent Fonterra Co-operative, holding its product prices despite April's milk price paid to farmers increasing from $6.90/kg of milk solids to $7.30/kg of milk solids.
"We never passed on the full amount of the commodity price rises to our customers over the last 18 months, and we continue to feel the pinch in our margins."
Consumers had reacted by treating the staples as a luxury, with cheese sales earlier this year falling 12% and butter by 10%, but competition from raw milk producers meant prices were more settled.
