Dairy prices buoyed by stockpile bid

ASB rural economist Nathan Penny. Photo / Supplied

International dairy buyers concerned about a New Zealand production downturn have buoyed global dairy prices, as they seek to stockpile product.

Fonterra's fortnightly global dairy auction, held overnight on Tuesday, rose 5.9% across all products, while the crucial whole-milk powder trade was up 7.6% at $US3226 ($NZ4414) a tonne.

ASB rural economist Nathan Penny said the recent stall in New Zealand dairy production had supported the lift in auction prices, which reaffirmed ASB's ''optimistic'' 2017-18 milk price forecast of $6.50 per kilogram of milk solids.

Fonterra's forecast for the season sits at $6.40 at present and Synlait's at $6.50.

However, Mr Penny cautioned that given the recent rain which swept across much of the country, the auction price strength would prove temporary. He predicted production would improve later in the dairy season.

''Also ... Fonterra's 3% (decline in) production growth is overly pessimistic,'' Mr Penny said.

He said with expectations of improving weather, production would be back in the black, with a 1% gains on the previous season.

He highlighted expectations of wide production variations across the country, given the climatic variations of storm, drought and rainfall.

AgriHQ dairy analyst Amy Castleton told BusinessDesk that buyers did seem to be more nervous that they would not be able to fulfil their requirements if New Zealand milk production continued to fall.

At the latest auction, buttermilk powder jumped 8.4% to $US2039 a tonne, while butter rose 7.9% to $US5277 a tonne

Skim milk powder rose 7.2% to $US1932 a tonne, while cheddar gained 7.2% to $US3739 a tonne. Rennet casein increased 5% to $US4943 a tonne, while anhydrous milk fat rose 0.5% to $US6581 a tonne.