Fonterra auction prices rise
Prices at Fonterra's latest online dairy auction posted strong gains overnight, the second in a row, as the effects of the drought in the US start to make themselves felt on the global milk supply chain.
The GDT-TWI Price Index rose 7.8 per cent, following on from a 3.5 per cent gain two weeks ago. The average winning price at last night's sale was US$3054 (NZ$3783) per metric tonne.
"We have been waiting for a decent lift in global dairy prices given market developments such as the US drought," said Kymberley Martin, a market strategist at Bank of New Zealand.
Speculation has been building recently that dairy farmers were set for a downward revision in the farmgate payouts as milk powder exports got caught between a high New Zealand dollar and increased global supply.
Today's auction has allayed that somewhat, as the increased costs of dairy cow feed in the US tighten supply, but there is still concern the high kiwi could offset this.
If the payout is cut it's likely to put pressure on the recovery in the rural economy, with farmers still struggling to get their balance sheets in the black after heavy lending in the run up to the Global Financial Crisis.
"This is an important result to keep current dairy payout forecasts on track when the risk of a downward revision had been starting to build," Martin said.
Of the eight product categories, seven posted price gains with activity again focused on the short dated delivery contracts.
Prices of milk protein concentrate rose 15.4 per cent, followed by a 14 per cent rise in anhydrous milk fat, and a 10.2 per cent gain in butter milk powder.
Lactose was the only category not to show any improvement, with prices flat compared to the sales two week ago.
The auction saw 168 participants out of a 703 qualified bidders take part, with 103 winning bids.
- © Fairfax NZ News
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