Prices surge 9.4pc at latest dairy auction

Business Reporter·NZME.·

3 Feb, 2015 07:06 PM2 mins to read

Dairy prices spiked higher at this morning's GlobalDairyTrade (GDT) auction, the GDT price index gaining 9.4 per cent since the last sale on January 21.

Whole milk powder prices, the most important product group for New Zealand producers, jumped by 19.2 per cent to US$2874 a tonne.

At that level whole milk powder prices are still short of the US$3500 required for the co-operative's current forecast to materialise.

See more details of today's auction here:

The AgriHQ Seasonal Farmgate Milk Price for the 2014-15 season has increased by 15 cents per kilogram milksolids to $4.55/kgMS following the GDT auction, which compares with Fonterra's current forecast for $4.70/kgMS.

"The strong increase in prices achieved at the February 3 GDT auction as well as the expectation that milk powder prices will continue to rise over the remainder of the season are the prime drivers of the improvement in the AgriHQ Seasonal Milk Price forecast for the 2014-15 season," AgriHQ dairy analyst Susan Kilsby said in a note.

It was the fourth consecutive price gain since the last sale of 2014 in December.

This morning's auction was the first to be held since Fonterra's announcement last week that its production would fall by 3.3 per cent in the current season, and analysts had expected prices to firm in response to lower supply.

The auction will give Fonterra some comfort about its $4.70 per kg farmgate milk price forecast for the current season and will add weight to the view that prices may have bottomed after falling by about 50 per cent in 2014.

At the auction, anhydrous milk fat prices fell by 5.4 per cent and chedder by 11.1 per cent, while butter rose by 6.1 per cent, rennet casein by 7.7 per cent, and skim milk powder by 6.7 per cent.

The average winning price was US$3042 compared with US$2758 a tonne at the last sale.

In its test commodities outlook, Rabobank said dairy commodity prices had fallen below sustainable levels in the medium term but that lower supply was expected to underpin a modest recovery in the second half of this year.