The 7% average price drop in the most recent Global Dairy Trade (GDT) auction is the third consecutive drop over the last six weeks.

The drop wasn’t completely unexpected given that the forecasted futures prices for whole milk powder (WMP) retreated by more than 6% in the week leading up to the auction on Tuesday.

NZ production

The result is driven by the fact that New Zealand production has held up better than expected and now instead of a 6% drop in New Zealand supply, some are predicting closer to a 3% drop.

At Tuesday’s GDT auction, the average product selling price was US$2,276/t – a 7.4% decline compared with the last auction. This leaves the index at its lowest point since September last year, when that market was practically on the floor.

The decline at Tuesday’s auction was led by Whole Milk Powder (WMP) prices, which plummeted by more than 10% in average price to $1,952/t.

WMP is the key commodity traded on the GDT, making up over half of sales. Butter was also hit hard, with average prices back more than 8%, while there were also significant declines in the average price of butter milk powder (-6.7%), anhydrous milk fat (-6.6%) and cheddar (-4.2%).

Skimmed milk powder prices were also in decline, falling by more than 2%.

Once more, the volume of product sold through the GDT auction platform remains low at just under 24,500t. This is a significant supply reduction when compared with the 35,400t of dairy commodities sold at the same time last year.

Late last week Fonterra revised downwards its farmgate milk price towards 18.5 c/litre. This has forced some New Zealand bankers to revise down forecasts for 2016/17 price.