The dairy industry received further bad news yesterday with milk powder prices falling 12% on internet-based trading platform globalDairyTrade.
This followed a 4% decline at the May auction and showed the effect the soaring exchange rate and market uncertainty were having and the delay in an expected recovery in international dairy prices.
Fonterra GlobalTrade managing director Kelvin Wickham said demand was noticeably weak for product supplied on long-term contracts.
He expected international demand would remain soft until consumer demand improved.
Whole milk powder averaged $US1886 ($NZ2863) at Tuesday night's trade, with prices ranging from $US1795 a tonne to $US2065 a tonne.
Mr Wickham said in an interview the prices reflected just how tough some countries were finding the recession.
Weak sentiment had returned to the market in recent months, fuelled by buyers waiting to see the effect of the United States Government's move to reintroduce export subsidies for dairy products.
Demand had risen in January, February and March, but the US announcement had encouraged customers to buy only enough product for their short-term needs in case the subsidies depressed prices further, Mr Wickham said.
The weak US dollar had accentuated the market's problems and stalled the sector's lift out of the price slump Fonterra thought was occurring earlier this year.
"Dairy prices will be weak through 2009 while prices react to that negative sentiment and perception," he said.
It has been a tough few weeks for dairy farmers, with the US reactivating export subsidies for dairy exports and Fonterra catching farmers by surprise with a forecast milk price for next season of $4.55 per kg of milk solids well down on the expected payout this season of $5.20.
