March 6, 2018 / 9:49 PM / a year ago

UPDATE 1-Global dairy prices fall as New Zealand supply ramps up

    * Global dairy prices slip 0.6 pct
    * Whole milk powder falls 0.8 pct
    * Increased supply from NZ curbs outlook for price gains -

 (Recasts, adds analyst comment, market reaction)
    By Charlotte Greenfield
    WELLINGTON, March 7 (Reuters) - Global dairy prices slipped
for the second time in a row at a fortnightly auction held early
on Wednesday morning as an influx of supply from New Zealand
curbed buying.
    The Global Dairy Trade Price index fell 0.6 percent, with an
average selling price of $3,593 per tonne, said auction platform
GDT Events.
    The index had edged down 0.5 pct at the previous sale,
snapping three consecutive auctions of gains.
    Whole milk powder (WMP), the most widely traded item, fell
0.8 percent after New Zealand dairy giant Fonterra         
increased the amount of powder on offer, though that was still a
better result than the 2.5 percent drop expected by derivatives
    "Fonterra had increased its WMP offer volumes ahead of this
event as milk flows start to improve, so buyers are unlikely to
feel as much urgency to secure product," said Amy Castleton,
dairy analyst at AgriHQ.
    New Zealand, the world's largest dairy exporter, had
suffered from curbed supply caused by unusually dry weather late
last year, which had pushed up prices. Wetter weather in recent
weeks led to a more favorable outlook for supply, which meant
further price gains were likely to be muted. 
    "From here, we expect prices to ease further through to the
end of the season. We expect NZ production to improve on the
back of the increased rainfall. In turn, this improved
production should put modest downward pressure on prices," said
Nathan Penny, ASB economist.
    The auction results can affect the New Zealand dollar
         as the dairy sector generates more than 7 percent of
the nation's gross domestic product.
    However, Wednesday's auction had little impact on the
currency, which had soared almost 1 percent overnight on
improved global risk sentiment and a weaker U.S. dollar. 
    A total of 19,292 tonnes was sold at the latest auction,
falling 4.8 percent from the previous one, the auction platform
said on its website.   
    GDT Events is owned by Fonterra but operates independently
from the dairy giant.
    U.S.-listed CRA International Inc          is the trading
manager for the twice-monthly Global Dairy Trade auction.
    A number of companies, including Dairy America and Murray
Goulburn         , use the platform to sell milk powder and
other dairy products.
    The auctions are held twice a month, with the next one
scheduled for March 20.

 (Reporting by Charlotte Greenfield
Editing by Gareth Jones)
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