Dairy prices rise for a third time in latest auction

Storm damage around Northland. Photo / John Stone
Storm damage around Northland. Photo / John Stone

Dairy product prices bumped higher again at the latest Global Dairy Trade (GDT) auction in the wake of cyclones Cook and Debbie.

The GDT price index gained 3.1 per cent from the previous auction two weeks ago, making it the third rise in a row.

The average winning price came to US$3139 ($4469) a tonne.

About 22,927 tonnes of product was sold, up from 22,642 at the previous auction.

Whole milk powder (WMP) prices, a key product for determining Fonterra's farmgate milk price, climbed 3.5 per cent to US$2998 a tonne.

ASB rural economist Nathan Penny said this month's severe weather had stymied a strong end to the New Zealand production season and might lead to a slow start to next season.

Thanks to Cyclone Cook following quickly in the wake of Cyclone Debbie, the country has been in storm mode for most of the past month.

"However, the saving grace for dairy is that it has come late in the season and the major dairying regions have escaped the worst of the production impacts," Penny said.

"That said, there is a silver lining to the lost dairy production - we now see upside to our $6/kg milk price forecast for this season.

"Moreover, the recent auction results reaffirm our $6.75/kg forecast for next season as well," he said.

Fonterra's current milk price forecast still stands at $6/kg.

A large volume of instant WMP sold at a lower price than the regular grade product, AgriHQ dairy analyst Susan Kilsby said in a note.

"It was unusual to see regular grade WMP selling at a premium to the higher specification product but we have seen a lot of strength in the futures market recently and it is the regular grade product this market settles against," said Kilsby.

Skim milk powder (SMP) jumped 7.1 per cent to US$2044 a tonne.

"The GDT prices indicate there are buyers that are prepared to pay a premium to source SMP produced in New Zealand," Kilsby noted.

"Elsewhere in the world there is a glut of SMP but here we are successfully moving product and attaining good prices."

Cheddar rallied 6 per cent to US$3462 a tonne, butter increased 2.9 per cent to US$4892 a tonne, while lactose added 1.2 per cent to US$935 a tonne.

Meanwhile, rennet casein dropped 3.8 per cent to US$6020 a tonne, while anhydrous milk fat slipped 0.5 per cent to US$5930 a tonne.

Buttermilk powder sold at US$1720 a tonne.

There were 130 winning bidders out of 173 participating at the 14-round auction.

The number of qualified bidders rose to 541, up from 537 at the previous auction.

Staff Reporter, BusinessDesk

- NZ Herald

Get the news delivered straight to your inbox

Receive the day’s news, sport and entertainment in our daily email newsletter

SIGN UP NOW

© Copyright 2017, NZME. Publishing Limited

Assembled by: (static) on production apcf03 at 26 May 2017 20:49:08 Processing Time: 4566ms