Dairy prices up again - Fonterra auction up 3.9pc

The price of milk powder rose to the highest level since Fonterra began its online auctions in July 2008, reflecting climbing world food prices and boding well for the payout for the dairy exporter's 11,000 dairy farmers.

The gDT-TWI price rose 3.9 per cent, following a 7.9 per cent jump in the previous auction two weeks ago.

The average winning price across the various dairy products on offer was US$4,540 per metric tonne, up from US$4,246 per metric tonne at the last sale.

Fonterra chief executive Andrew Ferrier said this week that prices for whole milk powder will probably stay at least 50 per cent above their long-term average on rising demand from emerging markets.

He told Bloomberg News that higher prices "are the new normal" and further gains are likely "before we start burning off demand."

Whole milk powder rose 7.9 per cent across all three contracts on offer.

Skim milk powder rose 0.7 per cent and anhydrous milk fat fell 2.4 per cent.

There were no prices for butter milk powder.

There were 68 winning bidders out of 121 who participated. There are 312 qualified bidders all up.

The Reserve Bank expects the strength in New Zealand's primary sector will slowly filter through to the wider economy once farmers repay debt.