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By Gavin Evans

Dec. 3 (Bloomberg) -- Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, said whole milk powder prices fell for a fifth time at auction, taking them to their lowest in more than two years.

Powder for February delivery fell to an average $2,078 a metric ton in a sale yesterday, down 15 percent from the price for January shipments in last month’s auction, the company said on its GlobalDairyTrade Web site. Near-month contracts have fallen 53 percent since the group’s first auction in July and are at their lowest since September, 2006, the company said.

Global dairy prices have plunged this year as production increased in the U.S. and Europe and last year’s record prices reduced demand. U.S. output in October was 1.2 percent higher than a year earlier after the national herd increased and each cow produced more, the Department of Agriculture said Nov. 17.

Auckland-based Fonterra accounts for about 40 percent of the global trade in milk powders, cheese and butter. Plunging prices and rising inventories prompted it to slash its forecast payment to its New Zealand suppliers last month.

Prices are unlikely to recover before mid-2009, and the cooperative’s 10,700 farmers may receive 24 percent less for their milk than a year earlier, Fonterra said Nov. 21.

The company’s Internet-based auctions offer a one-month contract with delivery starting two months after the auction, and two three-month contracts with delivery starting three and six months after the sale.

Whole milk powder for delivery March through May fell 15 percent to $2,284 a ton, Fonterra said. Powder for shipment June to August sold for an average $2,441 a ton, down 6.9 percent.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net.