November 21, 2017 / 9:09 PM / in a year

UPDATE 1-Global dairy prices fall to eight-month low as supply ramps up

    * Dairy prices fall 3.4 pct at fortnightly auction
    * Prices drop for fourth time in a row
    * Could lead to lower farmgate milk payment - analysts

 (Recasts, adds analyst comments, market reaction)
    By Charlotte Greenfield
    WELLINGTON, Nov 22 (Reuters) - Global dairy prices fell for
the fourth auction in a row and hit an eight-month low on
Wednesday, which could hit farmgate milk prices.
    The GDT Price Index dipped 3.4 percent, with an average
selling price of $2,970 per tonne, in the fortnightly auction
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 had a bumpy ride
as supply has picked up.
    "Buyers are unlikely to feel much urgency to buy product
right now with the prospect of more milk being available from
NZ," said Amy Castleton, Feilding-based analyst at AgriHQ.
    New Zealand dairy giant Fonterra         ,          had said
on Tuesday that its domestic milk output rose 3 percent in
October from the year before as wet weather subsided towards the
end of the month.             
    Prices for whole milk powder, the most widely traded
product, dropped 2.7 percent in the auction, in contrast with
derivative market expectations of a rise. Skim milk powder fell
6.5 percent.
    The sustained drop in prices could lead to Fonterra slashing
its milk payout to farmers by the end of the year, according to
    The world's largest dairy exporter currently pays NZ$6.75
per kilogram of milk solids to New Zealand farmers.
    "With the weak run of auction results and an improved
production outlook, we revise down our milk price forecast,"
said Nathan Penny, rural economist at ASB Bank, predicting a
payout of NZ$6.50.  
    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, investors were unfazed by the result as the Kiwi
rallied alongside its Australian counterpart on comments by the
Australian central bank governor on Thursday.
    A total of 35,042 tonnes was sold at the auction, falling
0.1 percent from the previous one, the auction platform said on
its website.
    GDT Events is owned by New Zealand’s Fonterra Co-operative
Group Ltd         , but operates independently from the dairy
    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 one
scheduled for Dec. 5.

 (Reporting by Charlotte Greenfield; editing by John
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