Christmas joy has come early for New Zealand dairy farmers as prices leapt 4.6 per cent across the board in the latest Global Dairy Trade auction, held overnight, with all indexes trending upwards.
Crucially, the Whole Milk Powder price - the biggest influencer on Fonterra's Farmgate milk price - charged ahead by 5.0 per cent to an average US$3,182/MT.
The Skim Milk Powder index - the second biggest influencer on milk price - followed closely behind, with a 3.6 per cent jump to an average US$2,889/MT.
Showing the biggest lift, but with very little in the way of volume on offer, Lactose shot up 13.5 per cent to an average US$1,004/MT.
The fats all showed increases as well - led by butter with a 3.8 per cent rise to an average US$3,986/MT. Anhydrous Milk Fat followed with a 2.6 per cent rise to an average US$4,278/MT, Cheddar came in up 2.4 per cent to an average US$3,734/MT and finally Butter Milk Powder increased 1.3 per cent to an average US$2,731/MT, but with very little product on offer also.
A total of 32,062MT of product was sold - lower than in recent auctions, but still attracting 112 bidders over 16 rounds.
In a market update on October 15, Fonterra increased the midpoint of its forecast farmgate milk price for the 2020/21 season by 40 cents to $6.80, but retained its $1 range of between $6.30 and $7.30.
Fonterra Chief Financial Officer Marc Rivers said the "bullish" result was "very pleasing" and it would have a positive effect on the economy.
"What it means is 145 million New Zealand dollars into the economy," Rivers told The Country's Jamie Mackay.
Strong participation from China contributed to the 5 per cent leap in Whole Milk Powder, while Skim Milk Powder's rise of 3.6 per cent meant it was around a $450 premium compared to European and US competition, Rivers said.
"So people are clearly valuing the provenance of New Zealand and the way we make the powder."
Butter's rise of 3.8 per cent meant it was "about to touch 4000 US dollars per metric tonne," but the strong result was difficult to pin down to Covid-19 restrictions in the Northern Hemisphere, Rivers said.
"On the one hand people are baking more at home for sure, on the other hand, the big use of butter would be at restaurants - so it's quite a switch there - and hard to see how exactly that's going to play out."
Meanwhile, Fonterra's milk volume forecasts were "still about the same" as what was projected at the start of the season, despite predictions of a La Niña summer, Rivers said.