Fonterra’s $6.75 per kg milk price forecast for 2017/18 looks safe for now despite a surprise fall in prices at the latest Global Dairy Trade auction, although much will depend on how the weather pans out over the peak of the season, say analysts.

The NZX Dairy Derivatives market had anticipated a strong lift in prices, particularly for whole milk powder, with plenty of trading activity occurring early this week on the back of curtailed production over August. However, concerns about the weather did not translate into higher prices as expected.

Instead, today’s auction saw the GDT price index drop by 2.4 per cent, possibly because of the sheer volume of product on offer.

Economists said much would now depend on how the weather pans out over the high-production months of October, November and December.

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