Dairy prices fell sharply in this week’s Global Dairy Trade auction.
The Global Dairy Trade website reported a drop in prices last week.
Whole milk powder decreased by 12.4% and skim milk powder fell even further, by 15.5%.
Charlton dairy farmer Doug Dodds was disheartened by the decrease.
“It’s always disappointing,” Mr Dodds said.
There was a strong supply of dairy so the fall in prices was not unexpected, he said.
“It is an indication that supply and demand are pretty close to equal.”
The GDT price index has fallen 11.7% since its peak in early December but it remains 48% higher than it was this time last year.
Mr Dodds was glad prices were not as low as they were this time last year.
“Those prices weren’t sustainable.”
The drop was mainly due to an excess of milk solids in Europe, Mr Dodds said.
DairyNZ regional leader for Southland and South Otago Richard Kyte said although Fonterra was maintaining its $6 forecast, farmers were being cautious.
“It is important for farmers to hang on to the gains they have made.”
Mr Kyte did not think prices were in danger of dropping to the level they were this time last year.
“I don’t think that is where things are sitting.”
Federated Farmers dairy industry group chairman Andrew Hoggard said December’s increase was due to a drop in supply.
“Low supply pushed the prices up.”
Fonterra had increased its production and the demand was not there to meet the supply, he said.