Prices of dairy products gained in the latest GlobalDairyTrade auction and the volume sold remained at elevated level for a second sale, suggesting overseas buyers aren't fazed by elevated nitrate levels in Westland Milk's lactoferrin.

The GDT Price Index, previously known as the GDT-TWI Price Index, rose 2.3 per cent compared to the last sale two weeks ago, the fourth gain in five auctions. The average winning price was US$4,941 a tonne, compared to US$4,847 a tonne.

The total volume of dairy products sold at the latest auction slipped to 56,173 tonnes, from 60,587 tonnes two weeks ago, which was the biggest on record for the GDT site. Prime Minister John Key said this week that Chinese officials were responding constructively to the Westland Milk issue and understood it wasn't a food safety

Commodity prices have broadly strengthened based on the Thomson Reuters/Jefferies CRB Commodity Index, which is near its highest level in four months.


See more results from the last auction here.

The average winning price of whole milk powder, the biggest product by volume, rose 2.8 per cent to US$4,005 a tonne. Skim milk powder fell 0.7 per cent to US$4,426 a tonne.

ASB Bank economist Nick Tuffley said the 2.3 per cent lift in the GDT price was "a move well within the usual volatility and effectively reversing the small fall in the previous auction."

"By delivery contract, the near-dated contracts, particularly the September contract, lifted the most. That effectively reversed the pattern of the previous auction in which the falls were concentrated within the first couple of contracts (September and October)," said Tuffley.

He said a limited comparison of Fonterra skim and whole milk powder prices with other sellers on the platform gave mixed results.

"For skim, a direct comparison shows Fonterra's price down slightly for the second delivery contract while DairyAmerica's price is up slightly. Again, the premium Fonterra has been receiving has narrowed, and is now lower than the average since October 2011. However, last year through June to August DairyAmerica actually sold at a premium to Fonterra, so the recent Fonterra underperformance doesn't necessarily imply any impact from the scare."

For whole milk powder, Fonterra was maintaining a strong premium against the Indian supplier Amul for the second delivery contract in which they both sold.

"These limited comparisons are again inconclusive about any effects of the bacterium scare on Fonterra's selling price," said Tuffley.


Overall, said Tuffley, dairy prices had been little affected to date by the Fonterra contamination scare.

"With prices holding firm to date, Fonterra's forecast milk price payout of $7.50/kg for the current season remains on track. Nevertheless, there remains some potential for modest trade impacts until NZ restores its reputation for safety and quality. Russia is still banning NZ dairy products (though is a minor customer), and the recent Westland Dairy nitrate issue highlights the challenges NZ needs to overcome."

The price of anhydrous milk fat rose 7.1 per cent to US$4,931 a tonne and butter milk powder fell 3.1 per cent to US$4,689 a tonne. Butter rose 3.3 per cent to US$3,614 a tonne.

Cheddar rose 0.9 per cent to US$4,375 a tonne. Lactose wasn't offered and milk protein concentrate rose 1.5 per cent to US$7,828 a tonne. Rennet casein rose 1.9 per cent to $10,085 a tonne.

There were 112 winning bidders over 14 rounds. There were 184 participating bidders out of a total number of qualified bidders of 866.