Dairy farmers did not get the start to the new year they were hoping for after product prices fell at yesterday's GlobalDairyTrade auction.
Dairy product prices fell for the second consecutive month as whole milk powder prices unexpectedly sank amid increased volume being offered.
The GDT price index fell 3.9% to $US3463 ($NZ5006), down from $US3656 at the previous auction two weeks ago. About 22,396 tonnes of product was sold, edging up from 22,321 tonnes at the previous auction.
Whole milk powder dropped 7.7% to $US3294 a tonne.
Fonterra increased its offer volumes of whole milk powder on GDT.
ASB chief economist Nick Tuffley said although prices fell in the first GDT auction of the year, it might reflect lower liquidity. Volumes purchased were once again soft in the absence of bidders.
''We see this drop as price consolidation and remain upbeat on the dairy outlook for the season.''
ASB last month revised its forecast up to $6.50 per kilogram of milksolids (kg/ms) from $6.
Mr Tuffley noted slim milk powder (SMP) prices continued to firm, up another 2.3%.
The relative WMP weakness reflected Fonterra's move to increase its offering of WMP at the expense of SMP and milk fats. It was worth noting that as well as another auction of low volumes sold, the number of bidders was the lowest for 15 auctions.
Despite the dip at the latest auction, the annual change remained impressive. Even with the small step back at the auction, WMP prices might have further increases to go and might challenge $US4000 a tonne in the coming months, he said.
Fonterra made 12,850 tonnes of whole milk powder available.
At the latest GDT auction, lactose fell 2.9% to $US836 a tonne and rennet casein declined 2.7% to $US6234 a tonne.
Anhydrous milk fat slipped 0.6% to $US5352 a tonne.
Meanwhile, butter rose 0.5% to $US4308 a tonne and cheddar added 1.4% to $US3894 a tonne.
Skim milk powder gained 2.3% $US2660 a tonne and butter milk powder increased 4.5% to $US2670 a tonne.
There were 120 winning bidders out of 151 participating at the 13-round auction.
- Additional reporting BusinessDesk