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Dairy prices tumble in biggest fall since 2015

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Global dairy prices have fallen sharply, easing from the record levels of recent weeks.

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The price of wholemilk powder, which strongly influences the payouts for local farmers, was down 6.5 percent.
Photo: 123RF

The average price at the fortnightly global dairy auction overnight fell 8.5 percent to US$4419 a tonne, after falling 3.6 percent in the previous auction.

It is the fourth consecutive fall in dairy prices and the biggest drop since 2015.

The price of wholemilk powder, which strongly influences the payouts for local farmers, was down 6.5 percent to US$3916 a tonne.

The prices for other products also fell, including butter down 12.5 to US$5807 per tonne.

NZX Dairy Insight said the result will be a “bit of a shock” to many people.

“While a further fall was expected, the magnitude wasn’t. It seems buyers have finally had enough of paying high dairy commodity prices,” it said.

Large drops in the dairy trade index is uncommon.

“The last time we saw a fall more than 5 percent was on the 7 March 2017 auction, down 6.3 percent.

“The last time we saw a greater fall than the one at the 3 May event overnight was the 4 August 2015 auction, which was down 9.3 percent and followed a 10.7 percent fall at the previous event,” NZX said.

However, it said punters would be pleased to know that commodity prices started at a much higher level then previous large drops.

Most regions, except north Asia decided they did not want to pay high any longer, NZX said.

“Whether this is a result of a fall in demand or supply chains already being full is yet to be seen, as it’s not clear from the mix of purchasing activity which way things are actually heading.”

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