Prices rise at Fonterra dairy auction
Dairy prices at Fonterra's latest international online auction improved last night, snapping a three-auction run of falls.
The GlobalDairyTrade's trade-weighted price index overnight rose 1.1 per cent compared with the last sale two weeks ago.
Before the declines began in May, the index steadily gained for nine consecutive auctions on the back of increasing demand and concerns about how New Zealand's drought would tighten supply.
Last night's average winning price was US$4598 ($5752) a tonne, up from US$4443 two weeks ago.
Maximum supply, the measure of how much product Fonterra has for sale, eased to 24,170 tonnes from 25,888 tonnes, with a total of 23,674 tonnes sold.
BNZ economist Doug Steel said last night's auction was "a reasonably positive result", but the outlook was still for a mildly downward bias over coming months as farmers recovered from the summer drought.
World dairy prices were still strong, more than 50 per cent higher than a year ago, and that was reflected in the milk price Fonterra recently confirmed for the coming season of $7 per kilogram of milk solids.
Last season's forecast price, yet to be finalised, was $5.80.
Steel said milk prices were higher, not just because of the lower volumes coming out of New Zealand, but because of weaker supply out of other exporting nations.
"Australia is well back as well, and the EU and US are pretty much going sideways, so supply's been pretty tight," he said.
"Meanwhile, demand, it would appear, is still fairly strong."
If the $7kg/ms price held, the economy would receive an extra $2 billion revenue over the next 18 months, Steel estimated. But exchange rate and offshore supply factors would still have an influence.
In the latest auction, only two of the nine product categories fell, and three were not traded. The biggest decline was in cheddar which fell 6.5 per cent, while whole milk powder, the largest category by volume, rose 2.2 per cent.
Anhydrous milk fat rose 1.7 per cent, and skim milk powder climbed 3.2 per cent. Butter improved the most, up 4.7 per cent.
Some 179 bidders took part last night, with 99 winning bidders, and 831 were qualified to bid.