Dairy product prices have sunk in the latest GlobalDairyTrade auction, paced by cheddar and whole milk powder, reflecting a sombre outlook.
The GDT average winning prices sank 10.7 per cent to $US2082 ($A2,821.90), down from $US2276 at the previous auction two weeks ago. It was the lowest level since July 2009. Some 31,691 tonnes of product was sold, down from 33,200 tonnes of product two weeks ago.
AgriHQ dairy analyst Susan Kilsby called the auction "a disastrous result," adding that "the NZX Futures market anticipated whole milk powder prices would fall overnight. However, the market underestimated the size of the fall".
"Farmers now face two consecutive seasons of extremely low milk prices," Ms Kilsby said in a note. "The majority of farmers can't break even at such a low milk price."
The AgriHQ 2015-16 Farmgate Milk Price decreased to $NZ4.22 ($A3.77) per kilogram milk solids, down NZ83 cents from a fortnight ago and $NZ1.27 lower than a month ago. It compares with Fonterra's 2015-16 milk price forecast of $NZ5.25/kgMS.
"Farm debt levels will rise," Ms Kilsby said. "Rural communities will suffer as farmers reduce spending to the bare essentials."
Within the auction, cheddar plunged 13.9 per cent to $US2,613, while whole milk powder sank 13.1 per cent to $US1,848 a tonne. Anhydrous milk fat dropped 10.6 per cent to $US2,621 a tonne, while skim milk powder shed 10.1 per cent to $US1,702 a tonne.
Butter slid 9.5 per cent to $US2,460 a tonne, while rennet casein fell 8.0 per cent to $US5,430 a tonne. Butter milk powder declined 4.4 per cent to $US1,794 a tonne.
Bucking the trend, lactose rose 1.9 per cent to $US549 a tonne.
The New Zealand dollar last traded at US66.04 cents at about 2.20pm on Wednesday in New York, compared with US67.00c at 5pm in Wellington the previous day. The currency was trading above US88c a year ago.
There were 130 winning bidders out of 135 participating bidders at the 10-round auction. The number of qualified bidders dropped to 628, down from 652 at the last auction.
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