Milk powder up in dairy auction as overall prices dip

Photo / Mark Mitchell

Whole milk powder rose in Fonterra's latest GlobalDairyTrade auction, even as overall prices of dairy products slipped, keeping the price index at its highest level since April 3.

The GDT-TWI Price Index fell 0.5 per cent compared to the last sale in early June, when the index rebounded from a three-year low. The average winning price rose to US$3,042 a metric tonne from US$2,899 a tonne two weeks ago. Whole milk powder rose 2.7 per cent to US$2,886 a tonne, the highest since early April.

See more details of the auction here.

Last month Fonterra, the world's largest exporter of dairy products, cut its forecast 2012 milk price and flagged lower payments in 2013 in response to a slide in global prices for dairy commodities. The cooperative says global supply and demand may start to rebalance later this year.

In the latest GDT auction, skim milk powder fell 4.8 per cent to US$2,834 a tonne. Anhydrous milk fat fell 0.8 per cent to US$3,092 a tonne and cheddar dropped 3.7 per cent to US$3,117 a tonne. Butter milk powder rose 2.5 per cent to an average US$2,509 a tonne. Lactose wasn't offered.

Milk protein concentrate declined 2.7 per cent to US$4,214 a tonne and rennet casein fell 1.9 per cent to US$6,788 a tonne.

There were 118 winning bidders over 13 rounds. There were 175 participating bidders out of a total number of qualified bidders that rose to 667 from 649.

Bank of New Zealand agricultural economist Doug Steel said that, while it was still early days, the auction provided evidence that the market was stabilising.

"It was good to see some semblance of stability in prices this time around," he told APNZ.

"For the time being, it locks those (June 7) gains in, but the bigger picture is that prices are still a long way down from where they were a year ago," he said.

Longer term contract prices are moving higher and shorter term contracts were going down, reflecting the "wash out" of the big increase in production in New Zealand and other southern hemisphere markets from the supply and demand equation.

Steel said that more price volatility was likely in the months ahead, but he expected to see an improvement towards the end of the year, assuming that production goes back to more normal levels after a bumper 2011-12 season.

"It seems unlikely that we will see a return to the type of weather that we have seen the last 12 months, which has been exceptionally good," he said.

- with APNZ