Commodity index remains elevated despite latest drop.
Dairy commodity prices have fallen sharply.
Dairy commodity prices have fallen sharply in the latest GlobalDairyTrade auction overnight, dropping 8.5% and slipping back to January levels.
Butter, whole milk powder and skim milk powder were all major decliners, losing 12.5%, 6.5% and 6.5% respectively compared to the previous auction on April 19.
However, the index remains elevated at 1379. Before this year those levels had not been seen since 2014.
The latest fall is the fourth in a row following significant gains in January and February.
Responding to the auction result, ASB said although the fall was larger than expected it had not affected its Fonterra milk price assumptions and its forecast was unchanged at $9.50 a kg of milk solids for 2021/22 and $9.20 for the following season.
Westpac said the result warranted a 10c cut in its milk price forecast to $9.50 a kg but it held its forecast at $9.25 for the subsequent season.
"We still expect this dip in Chinese demand will prove temporary as this Omicron wave will eventually pass and Covid restrictions will thus ease," it said.
"Moreover, we have already incorporated a moderation in prices into our forecast and the recent fall in the New Zealand dollar is also offsetting some of the global dairy price fall."
The auction sold 25,163 tonnes of product to 107 bidders.
