Global dairy prices record third consecutive drop

Economists say prices appear to be stabilising, despite the latest drop.
Economists say prices appear to be stabilising, despite the latest drop. Photo credit: Getty

International dairy commodity prices have recorded another drop at the latest Global Dairy Trade (GDT) auction, however economists say prices appear to be stabilising.

The global dairy commodity price index was down another 1.2 percent, with average prices sitting at US$3112/t at the overnight event.

Recent prices have been affected by uncertainty in the Asian market around the coronavirus outbreak and the drop was the third consecutive at the auctions this year.

However ASB senior rural economist, Nathan Penny said the drop was in line with the view that the virus impact on dairy markets would prove modest and short-lived. 

"After initially falling in response to the coronavirus by 6.2 percent, key whole milk powder prices have fallen by progressively smaller amounts in the two auctions since," said Penny. 

Penny said it was significant that the number of new virus cases in China was falling, and some normality was returning to the Chinese economy, albeit in patches. 

"Encouragingly, Fonterra reported last week that while there was some disruption, its products were reaching Chinese markets."

In a recent market update, Fonterra reaffirmed its forecast farmgate milk price range of $7.00-7.60 per kgMS and its forecast full-year underlying earnings guidance of 15-25 cents per share.