Fonterra's global auction dairy prices rebound
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A rise in dairy commodity prices at Fonterra's fortnightly global dairy auction confirms the dairy giant's recent whey contamination scare has not had a lasting effect on dairy prices.
The GlobalDairyTrade's trade-weighted price index rose overnight by 2.3 per cent compared with the last sale two weeks ago, a turnaround after the last auction's 2.4 per cent fall following the Fonterra whey contamination.
The average winning price was US$4941 (NZ$6190) a tonne, from US$4847.
Maximum supply, the measure of how much product Fonterra has for sale, fell to 56,742 tonnes from 61,526 tonnes, with a total of 56,173 tonnes sold.
BNZ currency strategist Mike Jones said the result was positive as dairy prices were already high.
New Zealand dairy commodity prices were 63 per cent higher than they were a year ago, he said.
Going into the auction BNZ did not have a strong view whether prices would rise or fall after the last auction's slight drop following the Fonterra contamination scare, Jones said.
However, the result validated the view that the fallout from the scare would not have a lasting effect on New Zealand dairy prices.
"That was almost the message from the last auction," he said.
Sentiment towards New Zealand dairy products remains strong, but at some point prices would get too high and they would have to come down, he said.
The market had been talking about demand resistance for a while, Jones said, "but there was no sense of that today".
In last night's auction, seven of the 10 product categories rose, and one was not traded.
Anhydrous milk fat led the gainers, up 7.1 per cent across all contracts, whole milk powder, the largest category by volume, rose 2.7 per cent, butter was up 3.3 per cent, and skim milk powder down 0.7 per cent.
The auction attracted 184 bidders, down from 199 last auction, with 112 winning bidders and 866 qualified to bid.
The New Zealand dollar recently traded at US79.82 cents.
The kiwi shed nearly a cent against the greenback yesterday afternoon to trade at US79.76c from US80.69c following the Reserve Bank's announcement of tougher-than-expected restrictions on low-equity home loans which will come into force from October 1.
Jones said the strong dairy auction had done little to boost the New Zealand dollar overnight.
- © Fairfax NZ News