3 Sep 2009

Lift in dairy prices sparks certainty over payout

7:27 am on 3 September 2009

An agribusiness specialist at Lincoln University says the latest price lift in Fonterra's on-line milk powder auction means the milk payout forecast is now a lot more certain than it was a month ago.

Whole milk powder prices climbed by an average of 24% in Tuesday night's auction to $US2858 per tonne.

That follows an increase of almost 26% last month - the largest lift in prices since Fonterra started a global trading system more than a year ago.

It attributed the result to falling world milk production and stronger demand from customers.

Professor Keith Woodford from Lincoln University says the auction price can give farmers more confidence that their payout will not fall below the forecast of $4.55 per kg for this season.

He says $5 per kg is now achievable. He also says the price is particurlarly good news for smaller companies like Westland and Open Country Dairy, which will flow straight through to their bottom lines.