Dairy prices fall in NZ Fonterra's latest auction

Fonterra's Global Dairy Trade-Trade Weighted Index, which reflects the range of 30 products and contract periods on offer, fell 6.7 percent, with an average selling price of $4,017. That followed a 2.3 percent fall in its previous auction, with the index gaining 17.8 percent over the past year.

Prices fell for most types of dairy products offered, with the sharpest being 7.2 percent dip in skim milk powder.

Fonterra holds two auctions a month, with the next one on July 19.

Fonterra has made an initial forecast of its payout for the just started production season to farmer shareholders of between NZ$7.15 and NZ$7.25, comprising a milk payment of NZ$6.75 a kilo of milk solids and an additional 40 to 50 NZ cents from operational activities.

That compares with a record payout of NZ$8 to NZ$8.10 for the season just ended, with Fonterra saying it expects returns this season to be dented by the strong New Zealand dollar and lower dairy prices.

The Global Dairy Trade price for whole milk powder is used as a reference in the settlement of cash-settled futures contracts offered by the stock exchange operator NZX Ltd.

Fonterra is owned by about 10,500 farmers and controls around a third of the world's dairy exports, generating more than 7 percent of New Zealand's gross domestic product and has annual sales of around NZ$17 billion.

Copyright Reuters, 2011