Optimism despite 7.4% fall in GDT

It follows a 3.1% fall at the previous auction. But ASB rural economist Nathan Penny says they are sticking with their $5/kgMS milk price forecast.

"With September NZ production confirmed as weak, fundamentally we'd expect prices to hold their level or increase at this juncture," says Penny.

"While overall prices are still 46.3% higher than the August trough, nonetheless prices have fallen over two auctions."

"We interpret this contradiction as markets overdoing the recent surge in prices. Potentially buyers expect that demand is subdued enough and/or inventories are high enough to cover the production falls (in the absence of other producers picking up NZ's slack). However at this juncture, we disagree."

Key results from last night's auction were:

AMF index down 5.7%, average price US$3,647/MT; Butter index down 5.6%, average price US$2,574/MT; BMP index down 9.4%, average price US$1,844/MT; Ched index down 4.6%, average price US$2,987/MT; LAC index not available, average price not available; RenCas index down 11.2%, average price US$5,469/MT; SMP index down 8.0%, average price US$2,018/MT;
WMP index down 8.0%, average price US$2,453/MT.