17 Nov 2011

Milk prices end run of falls in online auction

6:56 am on 17 November 2011

Prices have firmed in Fonterra's latest global dairy trade auction, halting months of decline.

Prices for six of the seven products on sale improved, with whole milk powder prices firming by 2.4% and skim milk powder by 1.7%.

Anhydrous milkfat prices increased by 8%, reversing from a big drop in the previous auction.

The dairy cooperative's Global Dairy Trade-Weighted Index rose 2.6% to an average selling price of $US3617 a metric tonne at Wednesday morning's auction.

Apart from a brief improvement in milk powder prices last month, dairy commodity prices have been declining for months.

The decline was a factor in Fonterra lowering its forecast milk payout to farmers recently to between $6.70 and $6.80 a kilogram of milk solids.

BNZ economist Doug Steel says prices are holding fairly steady, despite the risk of Europe's debt crisis denting Asian demand for dairy products.

He says prices are stabilising at a reasonably good level, down from the peak earlier in the year, but up on the 10 year average.

Mr Steel says given the conditions globally, it's encouraging that dairy prices are holding up.