Dairy prices fall 8.2pc in overnight auction

The average price of milk powder fell 8.2 per cent in Fonterra's latest online auction, snapping its stellar run-up to record prices in the last sale two weeks ago.

The average gDT-TWI price dropped 8.2 per cent to US$4,443 across all contracts, the first decline in seven auctions, on the globalDairyTrade platform. The decline was led by whole milk powder which dropped an average 11.4 per cent to US$4,105.

The biggest losses were in the contracts for May and June to August deliveries. Fonterra also lifted its forecast annual supply 1 per cent to 609,030 metric tonnes, the biggest projection since trading began on the platform in July 2008.

The decline was "broadly as expected," said Mike Jones, strategist at Bank of New Zealand. "Nonetheless, prices are still up 17.5 per cent for the year and likely to remain at favourable levels for some time to come."

Fonterra ramped up its forecast pay-out to farmers in February by 60 cents, bringing the total payment to as much as $8 a kilogram of milk solids. Global food prices have climbed to record highs over the past few months as major weather events have sapped supply worldwide.

The average price of skim milk powder fell 4.6 per cent to US$3,816 per metric tonne, and anhydrous milk fat declined 4.5 per cent to US$6,111 a tonne. There were no sales of butter milk powder.

There were 75 winning bidders from 108 participants over nine rounds. The platform has 306 qualified bidders.

Last week, Fonterra said it will open the globalDairyTrade platform to rivals and is seeking feedback from Europe's Arla Foods and FrieslandCampina, California Dairies and DairyAmerica of the US and Australia's Murray Goulburn on a draft set of market rules.