Dairy prices went beyond market expectations at this morning's Global Dairy Trade auction, the GDT price index rising by 3.7 per cent since the last auction.

Whole milk powder (WMP) prices, which have the greatest bearing on Fonterra's farmgate milk price, rose by 3.6 per cent to US$3254 a tonne.

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Skim powder prices, which also have a strong influence on the milk price, rose by 6.7 per cent to US$2924 a tonne.


In the other Fonterra reference products, buttermilk powder prices rose by 5.4 per cent to US$2786 a tonne, butter by 0.2 per cent to US$4117 a tonne, and anhydrous milk fat by 2.6 per cent to US$5191 a tonne.

WMP prices, after dipping mid-year, have remained above the important US$3000/tonne level since July.

ANZ said in a market commentary the auction outperformed expectations.

Futures prices have steadily lifted since the previous GDT event in October.

Milk powder was strongly sought after, which will support the price farmers are paid for their milk, ANZ said.

Rabobank, noting that cheese and lactose average prices moved lower, said the powders remained the "star performers".

"Demand has remained steady for New Zealand origin product across the course of the production season thus far," Rabobank dairy analyst Emma Higgins said.

She said general market availability for WMP has been tighter – with Oceania origin product faring well as a result.


"WMP offer volumes at their peak over this auction and the next one, so pricing at these levels is very supportive of Fonterra's new forecast range of $6.55/kgMS to $7.55/kgMS," she said.

"The market appears to be beginning to grasp that the weather has been unsettled in parts of the country across spring, having an impact on pasture growth and production."

Higgins added that it looked like the market had anticipated the New Zealand spring to be more productive than may prove to be the case.

"While official data is still pending, peak volumes will likely be lower for October – and so we could possibly see some upwards pressure on markets still to come given that some buyers have been very relaxed about procuring product – particularly skim milk powder," she said.

Rabobank's $7.15/kgMS forecast for the 2019/20 season, held since April this year, remained in place.

Fonterra last month shifted its 2019/20 forecast farmgate milk price range up by 30c to $6.55 - $7.55 per kg of milk solids.


The advance rate Fonterra pays its farmer owners will be set off the mid-point, $7.05 per kgMS, of the revised range, it said, up from $6.75 previously.

Dairy NZ's latest estimate of the break-even point for most farmers is $5.95/kg.

Fonterra's milk price for the season just ended came in at $6.35/kg.

The farmgate price hit a record high of $8.40/kg in 2013/14 before slumping to $4.40/kg in 2014/15, and to $3.90/kg in 2015/16.