Dairy prices drop at auction again

(File)
(File)

Prices have fallen for the 10th consecutive time at this morning's GlobalDairyTrade (GDT) auction.

The average price fell by 9.3 percent.

Whole milk powder, which is a crucial product for New Zealand, fell by 10.3 percent on average to US$1590 per metric tonne (MT).

Skim milk powder prices slumped by 14.4 percent to US$1419/MT on average.

The disappointing result comes just a day before the Fonterra board members gather for a two-day meeting at which they will review the forecast milk payout price for this season.

The current forecast of $5.25 is widely expected to be cut by more than a dollar. Some analysts think it could be cut to below $4.

The cooperative is also due to finalise the payout for the 2014/2015 season. It's currently $4.40 (with a dividend of between 20 to 30 cents).

The break-even point for farmers, who are now facing the prospect of two bad seasons in a row, is $5.70.

Rural Value (RV) said last week there are signs the weak global dairy prices are having an impact on farms prices and sales.

"We are noticing a definite change in sentiment following the latest Fonterra GDT auction and over the past few months we've witnessed a significant decline in the number of farm sales recorded," says national manager David Paterson.

"The projected pay-out is now below the cost of production for most operators and there is now anecdotal evidence of pressure on some farmers to sell before their financial situation deteriorates further.

"Purchasers are also holding off on making investment decisions until there is a clearer picture of what is happening in the global dairy market and are waiting for distressed sales to occur to see what happens in the rural property market as a result."

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