4 Mar 2015

Dairy prices consolidated in GDT auction

2:35 pm on 4 March 2015

Last night's Global Dairy Trade auction threw up no big surprises, consolidating last month's the significant price gains.

But one commentator said Fonterra's decision to put more wholemilk powder into the auction may have contributed to the slight softening of prices for that key commodity.

The average price for whole milk powder slipped by just one percent, to US$3,241 a tonne.

But skim milk powder rose by almost six percent and the prices for most other products also lifted, to produce a one point one percent gain in the overall price index.

The quantity sold, about 22,000 tonnes, was a little under the amount traded in the previous auction a fortnight ago.

But Fonterra increased the amount of whole milk powder it offered in last night's auction.

Dairy analyst with AgriHQ Susan Kilsby said that probably had a bearing on the result.

"I guess it changed buyer sentiment. Buyers were a little bit worried there wouldn't be enough product on GDT to meet their requirements. Seeing more coming on last night, the tonnages weren't a huge increase and there's still a lot less product there than there was 12 month ago, but it's certainly eased buyer concerns that there would be a shortage of product for the remainder of the season, and that's driven back prices."

Ms Kilsby said Fonterra had not explained why it had increased its GDT offerings again after cutting them back at the end of January.

Because of falling milk production, she said it had been hard to match the auction prices through other sales outlets.

"So the auction's probably been delivering the highest prices of any of the sales channels in recent weeks.

"The futures market has indicated that prices are more likely to stabilise or increase just a little from where they are now, whereas back a fortnight ago they were still forecasting a relatively steady increase in pricing. We've definitely seen things flattening out a little, so we're expecting maybe small increases but not huge gains in the next few months."

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