Fonterra milk price cut drives down NZ dollar

International milk prices slipped in the second auction held this month by New Zealand’s Fonterra Co-operative Group, the world’s biggest dairy exporter, an outcome that knocked the New Zealand dollar lower.

Fonterra’s GDT Price Index dipped 3.1% to an average selling price of $2,735 (€2,450) per tonne, the first decline following four consecutive increases that drove the index up 62.8%.

Prices for whole milk powder dropped 4.6%.

“We’d anticipated some consolidation,” Raiko Shareef, a currency strategist at BNZ told Reuters news agency.

“Over the medium term, though, we still expect prices to recover, as the El Nino weather pattern bites into production.”

The recent rebound had offered hope the market was stabilising after milk prices slumped to their lowest in 12 years in early August.

That was caused in part by slowing growth in China and some emerging countries, which had cooled demand.

“At present, prices remain consistent with Fonterra’s NZ$4.60 per (€2.80) kgMS 2015/16 milk price forecast, but if predictions of an El Nino event come into fruition, prices could move up sharply in the New Zealand summer months,” analysts at ANZ wrote in a note to clients.


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