December 19, 2017 / 9:22 PM / a year ago

UPDATE 1-Global dairy prices fall to 15-month low as supply surges

    * Dairy prices dip 3.9 pct, hitting 15-month low
    * Could lead to lower farmgate price in 2018 - economists

 (Recasts, adds economist quote, market reaction)
    By Charlotte Greenfield
    WELLINGTON, Dec 20 (Reuters) - Global dairy prices sank to a
15-month low at an auction on Wednesday, which could hit see
farmers take a hit to their incomes in the new year.
    The GDT Price Index dipped 3.9 percent, with an average
selling price of $2,969 per tonne, in the final auction of the
year, held in the early hours of the morning.
    Prices had risen in the second quarter on strong global
demand and as production eased, but have since begun to drop as
global supply has picked up. 
    The index rose 0.4 pct at the previous sale, but had fallen
in five of the last six auctions, according to GDT Events.
    "(The) dairy auction disappointed as a synchronised upswing
in global milk supply pressures all product prices lower," said
Con Williams, rural economist at ANZ Bank.
    "All up, the result will raise doubts over Fonterra's latest
forecasts of NZ$6.40." 
    Dairy giant Fonterra                   announced this month
it was cutting its forecast payout to New Zealand farmers for
the 2018 season from NZ$6.75 per kilogram of milk solids, citing
volatility in global dairy markets.             
    Of particular surprise in the latest auction was the 2.5
percent drop in prices for whole milk powder, New Zealand's
largest goods export. Futures markets had forecast a rise of as
much as 5 percent, according to analysts.
   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.
    The currency was trading down 0.5 percent at $0.6982 in the
wake of the auction.
    A total of 29,592 tonnes was sold at the latest auction, an
increase of 0.3 percent from the previous, the auction platform
    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 Global Dairy Trade auction.
    The auctions are held twice a month, with the next scheduled
for January 2.

 (Reporting by Charlotte Greenfield and Bangalore Commodities
Desk; Editing by Andrew Roche)
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