2 Dec 2009

Dairy prices continue to rise

5:31 pm on 2 December 2009

Dairy prices have risen for the fifth month in a row.

New Zealand dairy cooperative Fonterra says the average price for whole milk powder rose 3.6% to $US3560 per metric tonne at its December online auction compared with the November sale.

Whole milk powder prices have risen 95% since they slumped in July.

Fonterra says the latest price rise can be attributed to concerns over whether products will be available.

Global dairy trade manager Paul Grave says milk production worldwide is down slightly, although demand is starting to show signs of recovery.

"We are very optimistic about the future, with prices having almost doubled since July and well above long-term price levels, though we do have to be cognisant that supply and demand factors will soon come into play," he says.

"High prices will give incentive to farmers globally to increase their milk production and they also result in consumers reducing their demand."

Mr Grave says prices appear to be stabilising, in what is a very volatile market, and seem to have settled above historic price levels for the time being.

Fonterra says the sale affects 10% of its total output and 30% of its whole milk powder. The rest of Fonterra's output is sold at set prices to long-term customers.

Prices for another product, anhydrous milk fat, included in the online auction for the first time in November, fell 9% to $US4349 per metric tonne.

Despite the higher New Zealand dollar hurting returns to farmers, Fonterra lifted its forecast payout to its farmers by 19% to $NZ6.05 cents per kilogram of milk solids in November, due to stronger demand.