Dairy Prices Slip Slightly as Attention Turns to New Zealand's Spring Production

Global dairy prices slipped slightly at an auction on Wednesday, moderating further from a rally earlier in the year, but analysts said the coming spring season would be key to further price moves.

The GDT Price Index dipped 0.4 percent, with an average selling price of $3,339 per ton, in the auction held in the early hours of Wednesday morning.

A recent drop in price at four of the last five auctions has not yet caused alarm given it follows a strong three-month rally, which gave farmers confidence in an ongoing dairy price recovery after years of falls.

A total of 32,260 tons was sold at the latest auction, down 1.6 percent on the previous sale. Prices for whole milk powder, a major New Zealand export, fell 0.6 percent, as skim milk powder prices rose 0.3 percent.

The outlook for prices was now largely being driven by weather in the New Zealand spring season over the next three months given the country is the world's largest dairy exporter.

"Early season NZ production is ... key," said ASB economists in a research note, adding that an expected production lift could be curbed if there were more rain than usual.

The auction results can affect the New Zealand dollar as the dairy sector generates more than 7 percent of the nation's gross domestic product.

The currency fell around 0.7 percent to a two-month low of $0.7230 in the wake of the auction results.

GDT Events, one of the world's major dairy auction platforms, is owned by New Zealand's Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.

U.S.-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction.

Companies including Dairy America and Murray Goulburn, use the platform to sell milk powder and other dairy products.

The auctions are held twice a month, with the next one scheduled for September 5.