3 Apr 2013

Another sharp rise in global dairy prices

6:52 pm on 3 April 2013

Global dairy prices jumped more than 14% in Fonterra's latest auction, while volumes fell again.

The average winning price in the sale overnight on Tuesday was $US4966 a metric tonne.

It is the eighth consecutive rise in prices at Fonterra's fortnightly auction and followed a 15% increase at the last sale.

Westpac economist Nathan Penny says the reduction in supply due to the drought combined with strong demand from Asia has pushed up prices.

Last week, Fonterra lifted its forecast payout to farmers, due to surging dairy prices but warned the drought would hit production levels hard in coming months.

The sharpest increase in the latest auction was a 28% boost in skim milk powder prices.

Volumes fell again to 14,000 tonnes, nearly a third of the amount put up for auction in January.

Fonterra's medium heat skim milk powder with a June delivery date fetched more $US6300 a tonne, compared with similar product from Arla and DairyAmerica which sold for less than $US4000 a tonne.

Fonterra's whole milk powder for delivery soon also traded at more than $US6000 a tonne.

Butter was the only commodity to buck the price trend, falling 2.7% on average.

Prices were lower for later delivery periods corresponding with the new milk production season in New Zealand.