Prices at Fonterra's latest online dairy auction rose for a third time, with an upward trend now firmly in place thanks to price pressures from the drought in the United States.
The GDT-TWI Price Index rose 6 per cent overnight, and follows on from a 7.8 per cent gain two weeks ago. The average winning price at last night's sale was US$3174 per metric tonne.
Prices at the sale have now increased 17.3 per cent since the beginning of August, and 23.3 per cent since this mid-May lows.
"The 6 per cent gain in average dairy prices offers a lot of support to Fonterra's new payout forecast," said Mike Jones. "Importantly, the trend in prices appears to have turned higher, supported by drought conditions in the US."
Fonterra last month revised its milk payout forecast range for the 2012-2013 season down 30c to $5.25 per kilogram of milksolids from $5.50/k previously.
That equates to about $500 million less in the rural economy, threatening the deleveraging going on in the farming sector following the Global Financial Crisis.
At the time some commentators had been expecting further cuts on the back of the high New Zealand dollar, but the kiwi appears to have slipping into a weaker trading band.
The kiwi recently traded at US79.41c, down from around the US82c level seen at the beginning of August.
All eight product categories recorded gains in the session, led by a 15.8 per cent jump in butter milk prices, a 15.5 per cent increase in milk protein concentrate, and an 11.8 per cent rise in anhydrous milk fat.
The auction saw 203 participants out of a 717 qualified bidders take part, with 143 winning bids.
Are farmers right in demanding heavier penalties for those caught rustling?Related story: Farmers demand beefing up of rustling laws