The rapid rise of whole milkpowder prices appears to have hit a speed bump, with prices paid for Fonterra product at auction falling for the first time in six months.
The average selling price for whole milkpowder (WMP) fell 7.1 percent to US$3309 ($NZ4499) during an online auction early today for product to be delivered between March and July.
The fall followed five consecutive months of price rises which had buoyed farmers' hopes for continued increases in milk payments and dividends.
Fonterra's manager of global dairy trade, Paul Graves, said today it was likely some food manufacturers had re-stocked the supply chains they ran down at the height of the economic recession.
"This is just a minor price correction," he said.
"The market is finding its balance point."
A major rural bank, Rabobank, recently warned continuation of price increases which brought WMP to a 16-month high in December, could create another boom and bust cycle.
"Exporters and their suppliers may well be best served if the market at least started to stabilise now," the bank said in its latest Australia and New Zealand Agribusiness review.
Further lifts in commodity prices would have increased the prospect of another steep boom and bust cycle, the bank said.
Fonterra offered 25,000 tonnes of WMP and 3600 tonnes of anhydrous milk fat (AMF) - an industrial butter - in the auction.
WMP for delivery in March fell 6.8 percent to US$3282/tonne from the Decmber auction. The fall was bigger - 8.1 percent to $US3255 - for delivery during the three months from April, and was down 5.2 percent to US$3523 for the three months from July.
The average price of AMF - which fell 8.6 percent at the December auction - today recovered by an average 4.4 percent to US$4539. But it included a big variation in pricing, with a lift of 2.5 percent to US$4517/tonne for March delivery, 3.8 percent to US$4493 for the three months from April, and a jump of 9.2 percent to US$4735/tonne for the three months from July.
NZPA