Dairy prices on Fonterra’s bi-monthly GobalDairyTrade auction fell by 8.4% at the latest auction to bring prices to their lowest since August 2012. The decline has driven whole milk powder prices to within $20 per tons of their lowest point since 2008. Usually whole milk powder containing fat trades at a premium to skim milk powder, however now it is trading at a discount of $539. Being the world’s biggest dairy exporter, New Zealand’s economy is particularly affected by the drop. The price decline has sent the New Zealand dollar to its lowest point in two years as well. Australia and New Zealand Bank states that it expects lower dairy trade prices for the balance of 2014 as high inventories are dealt with. Volumes at the latest auction were 30% higher from the previous event, repeating the scenario of last August when volumes spiked for the early August auction before reducing and stabilizing prices. However, Fonterra forecasts whole milk powder volumes at GlobalDairyTrade over the next year to be 644,250 tons – an increase of 144,000 tons. Last week Chinese officials seized 26,455 pounds of yogurt candy tainted with Melamine, the same toxic plastic ingredient which is responsible for the 2008 infant formula scandal, and some are hoping that this event will increase Chinese consumers’ reliance upon imports, easing the oversupply.
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