'Attitude turnaround' in dairy auction

Dairy prices at Fonterra's GlobalDairyTrade auction have made a surprise rebound.

Dairy product prices have unexpectedly risen at Fonterra's GlobalDairyTrade auction, stemming two straight declines and offering optimism that the market can deal with increased supply.

The GDT price index rose 1.7 per cent from the previous auction two weeks ago and the average price was up to $US3101 ($NZ4396) per tonne.

Some 22,498 tonnes of product was sold, up from 22,328 at the previous auction.

Whole milk powder gained 2.9 per cent to $US2855 a tonne.

"For the market to absorb the extra volume available and to pay a higher price for it is an outstanding result and a complete turnaround from a fortnight ago," AgriHQ dairy analyst Susan Kilsby said in a note.

"Market fundamentals do support the higher [whole milk powder] prices but so often the dairy markets are driven by sentiment.

"There has been a lot of negative sentiment in the market recently so this result marks a real turnaround in attitude."

At the latest GDT auction, butter climbed 4.9 per cent to $US4910 a tonne, while rennet casein increased 3.6 per cent to $US5927.

Anhydrous milk fat gained 3 per cent to $US5799.

Meanwhile, skim milk powder sank 10.1 per cent to $US1948.

"SMP remains a challenge to sell due to the large global stocks of this product," Ms Kilsby said.

"All of the SMP offered last night by Arla Foods and Amul either didn't sell or didn't move off its starting price. Fonterra product fared a little better with its product generally selling but at low prices."

Lactose declined 2.7 per cent to $US913 a tonne, while cheddar fell 1 per cent to $US3406.

No prices were available for butter milk powder.

There were 113 winning bidders out of 154 participating at the 12-round auction. The number of qualified bidders rose to 533, up from 530 at the previous auction.