5 Sep 2012

Auction dairy prices up again

12:28 pm on 5 September 2012

International dairy prices rose for the third consecutive auction on Wednesday.

The global trade weighted index, which covers 30 products, has risen by 6% to an average price of $US3174.

Prices for anhydrous milk fat, butter milk powder and milk protein concentrate all rose sharply.

However, prices are still below their peaks of early last year.

BNZ economist Doug Steel said the fact that higher dairy prices are being traded out to March next year, shows there is an expectation that supply will weaken.

He said supply from New Zealand has tightened, which contributed to the rise.

Mr Steel said the drought in the United States will be the dominating factor in dairy prices, and the US milk supply is expected to contract over the next year which will put upward pressure on global prices.

Fonterra last week cut its forecast payment for the 2013 season to $5.65 - $5.75 per kg of milk solids, blaming the high New Zealand dollar.