6 Aug 2012

Dairy prices up

10:01 am on 6 August 2012

Fonterra's global dairy trade weighted index rose 3.5% on Wednesday night, reversing falls seen at the last three sales.

The average selling price was $2797 per tonne.

Prices rose for most products, with milk protein concentrate increasing 11.5%. Whole milk powder rose 3.5% and skim milk powder 3%, while prices for buttermilk powder and anhydrous milk fat fell.

The index has fallen more than 30% since March last year.

Fonterra holds two auctions per month, with the next on 15 August.

ANZ agricultural economist Con Williams says he expects prices to increase slowly over the next year.

"In 2013, there could potentially be quite a bit of upside, depending on how the USA drought turns out," he says.

"Higher feed costs look like they're going to be locked in for the next 12 months - that drought is very widespread and having quite a big impact on grain production.

"The US produces around 25% of corn, soybean and wheat crops that make up about 50% of the imput costs for US dairy farmers.

"That is going to impact on their ability to produce more milk over the next 12 to 18 months."