Bad weather has silver lining in GDT index rise

ASB senior rural economist Nathan Penny. Photo / Supplied

Dairy prices lifted again this week, following severe weather that stymied a strong end to the New Zealand production season.

The GlobalDairyTrade aggregate price index lifted 3.1% - the third consecutive rise - while there was a 3.5% increase in whole milk powder prices and a 7.1% rise for skim milk powder.

Prices for other products were mixed, with gains for butter, cheddar and lactose but declines in anhydrous milk fat and casein.

With Cyclone Cook following quickly in the wake of Cyclone Debbie, the country had been in ''storm mode'' for most of the past month, ASB senior rural economist Nathan Penny said.

However, the saving grace for dairying was it had come late in the season and the major dairying regions had escaped the worst of the production impacts.

But that was ''cold comfort'' to areas like Bay of Plenty, which had been hit hardest. The region accounted for 4% of New Zealand dairy production.

In particular, the severe flooding in Edgecumbe and its surrounding area meant the dairy season there was effectively over.

Dairy farmers in that area would be counting the cost of the twin cyclones well into next season, Mr Penny said.

Floods had delayed the maize harvest, as well as the regrassing of pastures. Potentially, those delays could lead to a feed deficit over the winter months and constrain production at the start of next season, he said.

There was a ''silver lining'' to the lost dairy production: ASB now saw upside to its current season milk price forecast of $6 and the auction result reaffirmed the bank's 2017-18 forecast of $6.75.

Looking to next season, production was now likely to start slowly and whole milk powder prices were expected to remain well supported. If anything, they were likely to drift higher by year-end, he said.

Westpac senior economist Satish Ranchhod said although prices remained lower than they were earlier this year, they appeared to have found a floor and were still 52% above the levels seen this time last year.