Butter prices shot up 9.9 per cent to US$5458/tonne after Fonterra reduced its butter volumes on the GDT platform - and cheddar gained 6.9 per cent to US$4265/tonne.
On the downside, skim milk powder prices fell by 1.3 per cent to US$2620/tonne and mozzarella lost 1.1 per cent to US$3960/tonne.
“This was a bullish result and one we had very much anticipated, given where the SGX-NZX derivatives market had been trading prior to the event – pitching for lifts across the board,” NZX dairy analyst Rosalind Crickett said in a report.
Milk powders followed the trend of the recent GDT “pulse” auctions - mini-events between the twice-monthly GDT sales.
Crickett said that in terms of buying activity, North Asia dominated at this event, taking out the top bidder’s spot for both milk powders and butter.
The Middle East kept its position as the top bidder for anhydrous milk fat and cheddar.
“Overall, the result is pleasing to see for farmers and goes against the typical grain of historical pattern at the final GDT event of the year, in which normally the index price drops,” Crickett said.
Earlier this month, Fonterra upgraded its milk price forecast, reported an 85 per cent lift in its first-quarter profit and raised its full-year earnings forecast.
The forecast farmgate milk price midpoint for the 2023/24 season is up 25 cents to $7.50 per kg of milksolids (kgMS), with the forecast range moving from $6.50-$8 per kgMS to $7.00-$8.00 per kgMS
Fonterra chief executive Miles Hurrell said at the time the revised milk price forecast reflected recent strengthening in demand for reference commodity products from key importing regions, including improvement in demand from China during the first quarter.
“Global Dairy Trade prices have lifted, and our sales book is also well contracted for this time of year, giving us confidence to increase our forecast farmgate milk price,” Hurrell said then.
Futures pricing had been anticipating a small lift in prices ahead of the auction.
“The momentum in prices heading into the latter part of the season can help Fonterra’s $7.50 per kgMS forecast midpoint be achieved if sustained,” ASB economists said in a note.
“Gains at the GDT overnight are in line with broader market themes, with commodity prices mostly strengthening – including a 1.3-1.5 per cent lift in benchmark oil contracts.”
Westpac chief economist Kelly Eckhold said he continued to think that expectations of reduced production in New Zealand and offshore may still be supporting prices.
“We remain cautious on prospects for the Chinese economy and associated Chinese dairy demand,” he said, adding that recent data confirmed ongoing deflation in consumer and producer prices in China.
This morning’s auction was the last for 2023. The next event is on January 3.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
