World dairy prices plunge overnight

Dairy product prices had the biggest drop in almost 20 months at Fonterra's latest GlobalDairyTrade auction as whole milk powder fell to its lowest level in more than a year.

The GDT price index dropped 8.9 per cent to US$4,124 a tonne from US$4,563 per tonne two weeks ago, the fourth straight decline and the lowest since August 2012. Some 39,653 tonnes of product was sold, up from 39,008 tonnes two weeks ago.

Soaring prices of global dairy products helped Fonterra lift sales in its first half by 21 per cent, including record shipments to China in December, although profit tumbled 53 per cent as the high price of milk, which is based on reference products including milk powder, drove up its input costs for products such as casein and cheese.

The company said last month it sees no let-up in the second half because factory constraints have led to an unfavourable product mix.

In the latest GDT auction, rennet casein rose 5.5 per cent to US$11,105 a tonne while cheddar fell 3.5 per cent to US$4,438 a tonne. Whole milk powder, the biggest product sold by volume, fell 8.4 per cent to US$4,033, its biggest decline since May last year.

Skim milk powder prices dropped 9.6 per cent to US$4,126 a tonne and butter declined 11 per cent to US$4,040 a tonne.

Butter milk powder prices tumbled 15 per cent to US$4,211 a tonne and milk protein concentrate declined 4.3 per cent to US$8,436 a tonne. Lactose wasn't offered at the event.

There were 167 winning bidders out of 201 participating bidders at the auction over 11 rounds. The number of qualified bidders rose to 756 from 747 at the last auction.

See more details of the overnight auction here.

Fonterra yesterday said it was offering its farmer members two opportunities to lock in the price paid for a percentage of their milk in the 2014/15 season following a successful trial run of the scheme in the current season.

Fonterra said a guaranteed milk price (GMP) would be offered on 60 million kg of milksolids in two tranches. Applications to supply 40 million kg would open in June, offering a 12 month GMP.

In December, applications would open to supply 20 million kgMS with a six month GMP offered on production from December 1.

The guaranteed milk price for the 2014/15 season followed a successful pilot involving 328 farmers who supplied 15 million kgMS for a guaranteed price of $7 per kg this season.