4 Feb 2015

Dairy prices rise again

1:20 pm on 4 February 2015

Global dairy prices are continuing to rebound, due to a major pick up in the whole milk powder price.

The dairy price index rose 9.4 percent in the overnight auction, with an average price of $US3042 per metric tonne.

It is the fourth consecutive rise in the index.

Fonterra's key price, whole milk powder, rose 19.2 percent, or $US472 dollars, to $US2874.

But the volume traded has fallen again, this time by 3326 tonnes.

AgriHQ dairy analyst Susan Kilsby said prices had risen and are expected to rise further.

She said that was due in large part to Fonterra's decision to reduce the volume of dairy sold over the rest of the season by 42 percent.

Agrifax reported demand for product at the auction was strong.

A senior economist at BNZ, Doug Steel, said he was expecting a decent lift in prices given the reduced supply-outlook for the current season.

"Not only the idea that the amount of wholemilk powder is going to be down about 15 percent from previous expectations, but also slowing global milk supply from pretty much every major producing country - the likes of the European Union, the US, and Australia all having their challenges over the past few months, in terms of supply."

Dollar bounce against Greenback

And the New Zealand dollar has rebounded sharply against the Greenback after the latest rise in dairy prices and on weakness in the US dollar.

At midday the currency was trading at 73.47 US cents.

It has traded a 2.6 US cent range since the Australian Reserve Bank cut interest rates yesterday, falling as low as 71.74 cents and then peaking at 74.36 cents after the dairy auction results.

Westpac currency strategist, Imre Speizer, says the 19 percent jump in whole milkpowder prices was much more than expected.

"We expected dairy prices to bounce because of the drought-constrained supply. But I guess the bounce of nearly 20 percent in wholemilk powder was much more than the market had expected," he said.

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