Strong demand for New Zealand's single biggest export - whole milk powder (WMP) - drove prices sharply higher at this morning's Global Dairy Trade auction.
The GDT price index jumped by 8.3 per cent - its biggest lift since November 2016 and the fourth consecutive gain at the twice-monthly auction.
WMP prices - which have the biggest bearing on Fonterra's farmgate milk price - leapt by 14 per cent to US$3208 a tonne and back to where they were in late January of this year.
Prices for WMP were up for all the contract periods, though the lifts were strongest for nearer dated contracts indicating strong short term demand, NZX dairy analyst Amy Castleton said in a commentary.
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Regular grade WMP to ship in September jumped by 16.3 per cent.
The NZX Dairy Derivatives market had indicated an increase in this grade and contract of WMP ahead of the event, but the lift was much greater than was anticipated, she said.
"There has been good demand for WMP recently, and there is still limited availability from New Zealand at this time of year with our season yet to get into full swing," she said.
"It's likely that buyers have been trying to get in while prices are relatively low, and while product is available, with milk production for the season ahead uncertain," she said.
Skim milk powder, which also has a strong bearing on the milk price, rose by 3.5 per cent to US$2694 a tonne.
Among the other Fonterra reference products, butter rose by 3 per cent to US$3717 a tonne, butter milk powder by 3.8 per cent to US$2417 a tonne, and cheddar by 3.3 per cent a tonne to US$3762 a tonne.
Anhydrous milk fat prices fell by 0.2 per cent to US$3981/tonne.
The 2020/21 season started on June 1, and volume is typically low at this time of year.
Production usually peaks over October and November.
Fonterra has set a wide $5.40 to $6.90 per kg milk price for 2020/21.