13 Oct 2015

Slowdown in dairy price recovery expected

10:03 am on 13 October 2015

International dairy prices should continue to rise but the extent of the increases will begin to slow, a dairy analyst says.

Organic Jersey cow and calf on a Rongotea farm.

Photo: RNZ / Alexander Robertson

In the past four global dairy trade auctions, the overall price index has risen 78 percent after hitting record low prices two months ago - at $US1590 a tonne on 5 August.

AgriHQ analyst Susan Kilsby said a slowdown in the rate of recovery was not surprising.

She said whole milk powder prices were expected to lift about $US200 to reach $US3000 a tonne by the end of the year, which would equal a farmgate milk price of about $5.50.

"The prices on the derivatives market are still increasing for most products and across most contracts, but that upward momentum is beginning to slow," she said.

"Prices have moved up so quickly that it's not surprising that we see them stabilise a little now.

"Really what's driving the underlying market is the fact that there is an expectation that milk production will slow down across the globe, particularly in New Zealand, but it isn't happening yet.

"At the moment, there's still plenty of product available, so it's just sort of balancing out the immediate market versus the expectations of where things are going to head."

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