Fonterra milkpowder prices fall

File photo / Mark Mitchell

The rapid rise of whole milkpowder prices appears to have hit a speed bump, with prices paid for Fonterra product at auction falling for the first time in six months.

The average selling price for whole milkpowder (WMP) fell 7.1 per cent to US$3309 ($4499) during an online auction early today for product to be delivered between March and July.

The fall followed five consecutive months of price rises which had buoyed farmers' hopes for continued increases in milk payments and dividends.

Fonterra's manager of global dairy trade, Paul Grave, said today it was likely some food manufacturers had re-stocked the supply chains they ran down at the height of the economic recession.

"This is just a minor price correction," he said.

"The market is finding its balance point."

A major rural bank, Rabobank, recently warned continuation of price increases which brought WMP to a 16-month high in December, could create another boom and bust cycle.

"Exporters and their suppliers may well be best served if the market at least started to stabilise now," the bank said in its latest Australia and New Zealand Agribusiness review.

Further lifts in commodity prices would have increased the prospect of another steep boom and bust cycle, the bank said.

Fonterra offered 25,000 tonnes of WMP and 3600 tonnes of anhydrous milk fat (AMF) - an industrial butter - in the auction.

WMP for delivery in March fell 6.8 per cent to US$3282/tonne from the Decmber auction. The fall was bigger - 8.1 per cent to US$3255 - for delivery during the three months from April, and was down 5.2 per cent to US$3523 for the three months from July.

The average price of AMF - which fell 8.6 per cent at the December auction - today recovered by an average 4.4 per cent to US$4539. But it included a big variation in pricing, with a lift of 2.5 per cent to US$4517/tonne for March delivery, 3.8 per cent to US$4493 for the three months from April, and a jump of 9.2 per cent to US$4735/tonne for the three months from July.

- NZPA