Wellington, Aug 4 NZPA - Fonterra's Global Dairy Trade arm will tomorrow test international markets for whole milkpowder (WMP) with its scheduled August internet auction.

The 14th online auction is offering 6000 tonnes for delivery in October, 8000 tonnes for delivery over the summer (November-January) and another 6000 tonnes for delivery at the end of the current milking season, between February and April.

Fonterra, the world's largest dairy exporter, last week confirmed that it still expects to pay farmers 12 percent less this season than their milk fetched last season.

It said continued falls in commodity markets meant it would have lowered the forecast by 10c/kg milksolids, if it had not been for a similar-sized gain in its added-value markets for branded consumer products and speciality ingredients.

According to the ANZ Bank, commodity prices have slumped 10 percent in the past six months in New Zealand dollar terms even as prices rose 2.8 percent on world markets.

The exchange rate for the New Zealand dollar against the US dollar has surged 32 percent in the past six months, reducing the amounts exporters receive in NZ dollar terms.

Prices for butter, cheese and milkpowder, which make up a fifth of all exports, have fallen 17 percent in New Zealand dollar terms in the past six months.

Finance Minister Bill English said last week chances of an export-led recovery from the nation's worst recession in three decades were being hampered by the rising exchange rate.

Yesterday the kiwi reached a high of US67.13c, before dropping back to US66.77c at 5pm.

In Washington, where the US Department of Agriculture (USDA) is expected to spend $US8.8 billion on farm subsidies, payments to American dairy farmers have been lifted by $US243 million ($NZ369 million).

Federated Farmers said today that the American taxpayer is paying up to $US2020 per tonne to buy skim milkpowder (SMP), which is up $US300 on previous support levels and $US2880 per tonne for block cheddar cheese, up $US400.

"American dairy farmers cannot moan about export prices when US Government is buying some 68,000 tonnes of skim milk powder and 34,000 tonnes of cheese," the lobby said.

In addition, the USDA had given almost 91,000 tonnes of surplus skim milk powder to schools, food banks and other public programmes.

Last month's Fonterra auction priced the WMP that New Zealand predominantly exports at $US$1829/tonne.

Federated Farmers said there was "an outside risk" that the new US subsidies might indirectly affect WMP prices, as there was a linkage between the prices paid for SMP and WMP.