October 17, 2017 / 9:03 PM / in 10 months

UPDATE 1-Global dairy prices fall for second time in a row

    * Dairy prices fall 1 pct at fortnightly auction
    * Suggests struggles after earlier rally
    * Analysts see price recovery later in the year

 (Recasts, adds market reaction)
    By Charlotte Greenfield
    WELLINGTON, Oct 18 (Reuters) - Global dairy prices slumped
for the second time in a row at an auction held early on
Wednesday, suggesting an earlier rally was running out of steam.
    The GDT Price Index dipped 1 percent, with an average
selling price of $3,204 per tonne, in the auction held in the
early hours of the morning.
    The index fell 2.4 percent at the previous sale, according
to GDT Events, which runs the auctions.
    Prices had risen in the second quarter on strong global
demand and as production eased, but have since had a bumpy ride.
    Nevertheless, analysts were upbeat on the outlook for dairy
prices given very wet weather had curbed production in New
Zealand, the world's largest dairy exporter.
    "We suspect that recent price weakness relates to the
seasonal peak in auction volume," said Nathan Penny, rural
economist ASB, adding that dairy giant Fonterra          had
recently increased the volumes it offered at auction.
    "However, these factors are temporary and the weaker supply
fundamentals will dominate over a longer period, sending prices
higher by year end," he added.
    The auction results can affect the New Zealand dollar
         as the dairy sector generates more than 7 percent of
the nation's gross domestic product.
    The currency fell from around $0.7180 to $0.7167 in the wake
of the auction.
    Overall, volumes dropped 6.1 percent, with a total of 35,669
tonnes was sold at the latest auction.
    Skim milk powder was hit particularly hard, falling 5.6
percent, while whole milk powder eased 0.5 percent.
    GDT Events is owned by New Zealand’s Fonterra Co-operative
Group Ltd         , but operates independently of the dairy
    U.S.-listed CRA International Inc          is the trading
manager for the twice-monthly Global Dairy Trade auction.
    A number of companies, including Dairy America and Murray
Goulburn         , use the platform to sell milk powder and
other dairy products. 
    The auctions are held twice a month, with the next one
scheduled for Nov. 7.

 (Reporting by Charlotte Greenfield; Editing by Hugh Lawson)
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