Milk Powder Prices Drop to Three-Month Low on Production Outlook

Whole milk powder auction prices tumbled to a three-month low amid expectations of rising New Zealand production in the second half of the year.

Powder for August delivery slumped 15 percent, according to a trade-weighted index on the Fonterra Cooperative Group Ltd.’s GlobalDairyTrade website. The near-term contract for New Zealand product fell to $5,250 a metric ton, the lowest since March 5. Across all contracts out to December, prices dropped 7.1 percent to $4,643 a ton.

Fonterra expects at least 2 percent growth in New Zealand milk collection in the 2013-14 season, Chief Executive Officer Theo Spierings said in a May 29 interview. Slowing global milk supply suggests powder prices across all contracts will remain around current levels until the end of the year, he said.

Prices surged to a record in April as a drought declared across the entire North Island including Waikato province, the country’s biggest milk producer, curbed collection. The nation may receive near-normal rainfall through July, the National Institute of Water and Atmospheric Research said last month.

Fonterra on May 29 said it expects to pay its farmers NZ$7 ($5.61) a kilogram of milksolids in the 2013-14 season, up from NZ$5.80 in the season that ended May 31.

Fonterra, which accounts for about a third of the global trade in dairy products, sells whole, skim and butter-milk powder, dried-milk fat, lactose, butter, cheese and casein at its GlobalDairyTrade auctions. The company offers monthly contracts with delivery starting from two months after the sale. Casein is a protein found in milk.

In other auctions, prices for August delivery of milk fat butter and skim milk powder also declined. Butter milk powder increased, while cheddar, lactose, casein and milk protein concentrate weren’t offered.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Chris Bourke at cbourke4@bloomberg.net

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