By Tina Morrison
New Zealand whole milk powder futures have declined, paring their earlier gains, after concerns about slower growth in China pushed down global equity markets.
September futures slipped US$50 (NZ$77.59) a tonne to US$2,110, and contracts from October through May also fell, according to NZX data.
Whole milk powder futures have rallied 46 percent from a low of US$1450 a tonne earlier in August after Fonterra said it would reduce the volume it offered on the GlobalDairyTrade auction platform following a slump in prices.
The price lifted 19 percent to an average US$1856 at the last GDT auction on August 18 and the futures are still signalling the price will rise further at the next auction on September 1.
However a slump in global equity and commodity markets has pulled back the premium.
"The market has had an incredible run since the last GDT with the prices having rallied almost 50 percent, so there is a bit of correction on that," said OMF financial markets director Nigel Brunel.
"But obviously in the last few days, there's been considerable volatility in global equity markets, led by China, which is now having a bit of a contagion effect on markets generally."
The implied premium in futures to the GDT may narrow further should stock market weakness persist, as investors pull back expectations for GDT demand, he said.