21 Jan 2015

Dairy index rises third consecutive time

1:48 pm on 21 January 2015

The global dairy price index has risen for a third consecutive auction, led by a bounce back in the whole milk powder price.

There has been a reduction of more than $4 billion in dairy export revenue.

The global dairy price index rose one percent to US$2758 in the latest overnight auction. Photo: AFP

The global dairy price index has risen one percent in the latest overnight auction.

The average price jumped by $US49 to $US2,758 per metric tonne.

Fonterra's key price, whole milk powder, increased again, this time up 3.8 per cent, to $US2,402 a tonne.

But the volume traded fell about 7.5 per cent, or 2343 tonnes, to 31,300 tonnes.

Director of Rabobank's dairy research Hayley Moynihan said the figures were encouraging, even though the increases were lacklustre.

Ms Moynihan said there may be less milk produced this season.

She said the dry conditions did not yet seem to be leading buyers into pushing up prices.

"With recent commentary around dry weather in New Zealand expected to impact milk production over the remaining months of the season, buyers obviously aren't yet nervous. They are securing the products availiable, but not nervous enough to really push those prices up higher."

Ms Moynihan said the big test will be in April when European milk quotas will be removed for the first time in more than 30 years.

But ANZ Bank rural economist Con Williams said lower supply levels were driving whole milk powder prices higher.

"Largely the price improvement seems to be driven by shrinking supply through global dairy trade, Fonterra reduced supply a little bit at this auction," he said.

Separately, ANZ has cut its milk price forecast for the current season once again, to $4.35 a kilo of milk solids, compared with an earlier estimate of $4.75.

Fonterra is currently picking a milk price of $4.70 per kilo.

In mid-December, the global dairy price index rose 2.4 percent following three successive drops.