Dairy commodity prices at Fonterra’s latest auction dropped for the fourth month running, amid expectations of rising global milk supplies.

Average prices for all commodities dropped by 8.3%, with skimmed milk powder down by 8.9% and whole milk powder by 7.7% across all contract periods.

Paul Grave, GlobalDairyTrade manager, said the market was rebalancing amid increasing supply and an uncertain economic outlook.

In the UK, dairy producers’ margins over purchased feed increased by 0.54p/litre in June this year compared with 2009, to 18.36p/litre, according to the latest figures from Kingshay. A 0.8 litre/day increase in yield per cow and a 0.23p/litre rise in milk price combined with a £9/t reduction in feed prices to boost margins to £128/cow.

However, annual rolling results to the end of June painted a less buoyant picture. Average milk prices were 1.56p/litre below the previous rolling year, at 24.43p/litre, more than eroding slightly cheaper feed costs and higher milk yields. This put the margin over purchased feed at 17.88p/litre which is 1.09p/litre below the previous year.