Prices of dairy products rose in the final GlobalDairyTrade auction of the year, though whole milk powder, the biggest product by volume, fell for the fourth sale in a row,

The GDT-TWI Price Index rose 1.1 per cent compared to the last sale two weeks ago. The average winning price rose to US$3,311 a metric tonne from US$3,290 a tonne in the last auction. Whole milk powder fell 0.6 per cent to US$3,147 a tonne while skim milk powder gained 1.1 per cent to US$3,419 a tonne.

Westpac Bank economist Nathan Penny said that compared to the May lows, dairy prices were now around 28 per cent higher.

"However, the auction was mixed across products, with rises interspersed with falls, and a rise in the NZ dollar eroded all of the gains. Volatile cheddar and casein recorded large rises of 4.9 per cent and 6.9 per cent respectively, explaining much of the overall rise," he said.


Benchmark whole milkpowder prices fell 0.6 per cent, while skim milkpowder rose 1.1 per cent. With the New Zealand dollar rising around 2 per cent between auctions, prices in NZ dollar terms actually fell around 1 per cent.

"Looking beyond the noise from auction to auction, we see the general trend for dairy prices heading up for 2013," said Penny.

"The effects of the northern hemisphere drought continue to linger. Coupled with improving Asian growth, particularly in China, we expect this will support dairy prices over 2013. As we expect the NZ dollar to average USD 0.85 over 2013 (from USD 0.84 currently), prices should also improve in NZD terms, albeit more modestly."

Fonterra, the world's largest exporter of dairy products, raised its forecast farmgate milk payment this month and chief executive Theo Spierings said global dairy prices "are likely to move higher in the first half of 2013" given rising feed prices and unfavourable climatic conditions in the US, Ukraine, Russia, Brazil and Argentina. Thomson Reuters/Jefferies CRB Commodity Index rose 0.2 per cent to a two-week high overnight.

The total volume sold fell to 47.195 tonnes from 52,596 tonnes two weeks ago.

Anhydrous milk fat fell 0.1 per cent to US$3,180 a tonne. Butter milk powder fell 0.4 per cent to US$3,600 a tonne with just the Feb. 13 contract sold. Cheddar rose 4.9 per cent to US$3,510 a tonne. Lactose wasn't offered for sale.

Milk protein concentrate rose 1 per cent to US$6,039 a tonne and rennet casein rose 6.9 per cent to US$8,477 a tonne.

There were 145 winning bidders over 11 rounds. There were 195 participating bidders out of a total number of qualified bidders of 737.