2 Dec 2015

Global dairy prices bounce back

11:17 am on 2 December 2015

Global dairy prices have picked up in the latest auction - the first rise since October.

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Photo: 123rf.com

The average overall price shook off three consecutive declines to rise by nearly four percent overnight to $US2419 a tonne.

The whole-milk powder price, on which Fonterra bases its payout forecast, was up by just over five percent to reach $US2260 a tonne.

That is still well short of the break-even range for dairy farmers, who need about $3000 or more.

The amount of product put up for auction also dipped to below 30,000 tonnes.

Jacqueline Rowarth, an agri-business professor at the University of Waikato, said the fluctuations in prices in recent months were expected.

She said there was less product for auction, farmers were facing a drought and were cutting production, and markets may be starting to stock up.

Prof Rowarth said the last time there was a drought, the global food price index rose one percent.

ASB rural economist Nathan Penny said prices were expected to gradually pick up in time.

"Markets aren't in a particular hurry to restock or to buy ... they feel other producers are filling the gap that New Zealand's lower production is leaving.

"But we think that will start to bite gradually over the next few months, and as that does prices will lift over the rest of the season."