The GDT price index fell by 0.2% but whole milk powder prices rose 2.1%.
Butter and anhydrous milk fat fell by 3.4% and 3.7% respectively and casein came down 8.1%.
The past three months have seen a realignment of prices for milk fat products while milk powders have been steady.
For the farmgate milk price to stay in Fonterra’s predicted range of $6.25 to $7.25/kg milksolids the main commodities need to be about where they are now – AMF and casein at US$6000/tonne, butter $5000, WMP $3000 and SMP $2500.
With supply and demand relatively balanced the GDT price index, as a composite of product values, has stayed remarkably steady for the past three years.
Such steadiness breeds confidence in $6-plus farmgate payouts for the fourth season in a row.
Dairy analysts and economists say Chinese demand is good and European, American and New Zealand milk supplies are not growing.
The biggest cloud on the horizon is the US-China trade war, Westpac’s Anne Boniface said.
“Our previous view that both sides would eventually step away from the conflict, as it was in neither side’s best interests, appears to have been too optimistic.”
Recent developments have upped the stakes for both sides and consumers have been caught in the crossfire.
“That points to a longer-lasting conflict than we had previously envisioned.”
GDP growth would suffer in both countries and Westpac expects dairy prices to ease modestly over the rest of the year.
It therefore shaved 20c of its forecast milk price to $6.50/kg, towards the lower end of the broad Fonterra range.
ASB Bank stayed put at $7, saying the lift in WMP prices is pleasing given its importance to NZ exports and that it is still early in the season.
NZX analyst Robert Gibson said the spot price, if the season’s output was sold at today’s prices, indicates a milk price of $7.26.
That is helped a lot by a cheaper NZ dollar value, now US64.8c.
The NZX milk price model spat out a prediction of $6.73, down 8c from the previous GDT.
The milk price futures market has dropped 6c and settled at $6.76, Gibson said.
