Global Dairy Trade (GDT) prices have been tracking down for about six months.
For the GDT trading event for October 2, prices were down on anhydrous milk, butter, cheddar, skim milk powder and whole milk powder.
Overall the prices for October were down by 1.9% from the previous trading event in September.
Charlton dairy farmer Peter Hargest said dropping dairy prices meant dairy farmers were revisiting unwelcome – yet familiar – territory.
“Falling prices will further dent dairy farmer morale.
“The upside to falling prices means that hopefully more product will be consumed.”
He said there was also a falling exchange rate which could soften the impact, but on the other side of the equation, this also meant costs would rise.
“Rising costs are a particular concern to farmers as well, so there’s two sides of the one coin.
“Farmers will react to this by prioritising and tightening expenditure.”
The next aspect to watch would be how the markets reacted when New Zealand dairy production passed peak flows later in October/November.
“Through time factors things change, and [change] hopefully lifts prices.
“People always need food.”
There had been some rises in prices for butter milk powder, rennet casein and a small rise of 0.6% for lactose.
However, GDT prices were only about 11% higher overall from the same time 10 years ago.
Butter was the biggest loser, with a decrease of 5.9%.
Federated Farmers Southland sharemilking chairman Kass Rauber said he was not worried about the price decrease.
“A lot more product has been put up to auction compared with this time for the last two seasons,” he said.
“There has historically been more commodity put up for auction in November, so I would expect to see more of these larger quantities for at least the next two or three auctions, especially with Fonterra shareholders being up 4% nationwide with production to date.”
Mr Rauber said GDT would always go up and down and the Southland shareholders’ milk supply was up 10% compared with this time last season.
He said GDT did fluctuate at the moment due to a lot of product for sale and supply and demand meant when there was more product, prices went down.
“Most farms are up on production with the weather being on dairy farmers’ side, and I’m seeing dairy farmers with a positive outlook on this season.”
Mr Rauber said the drop in prices meant there were new opportunities available.
“With the slightly lower prices at auction this will open up other markets.
“There are markets out there that have been priced out of previous auctions.. they will now look at purchasing at these lower prices therefore opening up other markets.”