March 5, 2014

In the latest GlobalDairyTrade (GDT) auction, global dairy product prices recorded their biggest decline since June last year, paced by whole and skim milk powder, suggesting New Zealand commodity prices may ease from record highs.

The GDT Price Index fell 4% from the last sale two weeks ago. The average winning price was US$4,794 a tonne from US$5,016 a tonne at the last auction. Some 42,037 tonnes of product was sold, up from an eight-month low 34,568 tonnes in the previous sale.

The biggest product sold by volume was whole milk powder which fell 5.7% to US$4,703 a tonne and skim milk powder declined 3.9% to US$4,658 a tonne. Butter milk powder fell 5.8% to US$4,792 a tonne.

The sale follows the release of the ANZ Commodity Price Index for February, which charted a new record high, with gains for cheese, butter and casein, and comes after government figures showed the New Zealand's terms of trade gained 2.3% in the fourth quarter, to the highest level since December 1973, driven by dairy products.

"Fonterra had raised the volumes being offered for all the main products, apart from anhydrous milk fat," Con Williams, agri economist at ANZ Bank New Zealand, said in a note. "The seasonal lift in supply of dairy products on GDT proved difficult for the market to swallow, signalling a modest price correction could be on the cards. As long as supply continues to build, a moderation in prices is expected into 2014-15."

Milk protein concentrate fell 3.3% to US$8,524 a tonne and butter rose 3.9% to US$4,746 a tonne. Cheddar rose 0.7% to US$4,837 a tonne. Rennet casein climbed 2.9% to US$11,791 a tonne and anhydrous milk fat fell 3.5% to US$5,126 a tonne.