News: FSF 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)

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 (FCG) 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 (FCG), but operates independently of the dairy giant.

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 (MGC), 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.