Fonterra has revealed that prices were down sharply at its latest auction, as concerns about supply, which had fueled recent price increases, eased.

The New Zealand-based dairy processor said average prices for anhydrous milk fat, skim milk powder and whole milk powder fell 13.7 per cent across all contracts and contract periods after its latest globalDairyTrade trading event.

Paul Grave, globalDairyTrade manager, said the result reflected supply increasing globally in response to what has been a very strong price signal over recent months. Concerns in the market about short term product availability, which to a large extent underpinned recent high prices, appear to have eased.

Rough trend

Patty Clayton, a senior analyst at Datum, told DairyReporter.com that the news from Fonterra gives a rough idea of a global trend whereby the market is moving from a situation of excess demand to one where supply is recovering.

However, Clayton said the price slump is to a large extent particular to New Zealand because the country is moving into the peak production period.

European market

In Europe, the analyst said the market remains firm although production is starting to increase slightly in France and Germany. As for the direct impact of the price and supply situation in New Zealand, she said it may increase competition on international markets and put pressure on European exports of dry powders.

In its latest take on the market, published on June 29, the European Commission said: “At present, EU and world prices appear to be stabilising for most commodities despite the seasonal increase in EU and US milk production.”

The quarterly report on the dairy market judged that the release of butter and SMP intervention stocks have so far had no negative impact on the market. Clayton said the latest tender results, due for release on Thursday, will give the most up to date view from the commission on the current state of the dairy market.