International buyers of New Zealand dairy products shrugged off any concerns over contamination this week, as prices at Fonterra's dairy trade auction continued to rise.

The auction was the first since news broke about small traces of DCD, a nitrate inhibitor, being found in some milk powder.

Fonterra, which has stressed there were no food safety concerns involved, took care to tell bidders that the products sold were not made at the time of the scare.

On Tuesday night, prices on the auction's GDT-TWI index rose 2.4 per cent, enhancing the chance of a higher end-of-season payout for farmers. It was the fourth straight gain this year. The average winning price also rose to US$3598 (NZ$4261) a metric tonne, up from US$3442 a metric tonne.

The price of whole milk powder, the biggest product by volume, rose 5.4 per cent to US$3468 a tonne, while skim milk powder rose 0.5 per cent to US$3554 a tonne. Cheddar cheese was the only category to record a slight fall, its price slipping 0.1 per cent to US$3525.

The auction had 135 winning bidders from 212 participants out of a total of 762 qualified bidders. The GDT-TWI index is closely watched by economists because of the importance of dairy exports to New Zealand.

Fertilisers containing DCD have been withdrawn by two major fertiliser manufacturers.

Ross Verry, general manager of agri and business strategy at ANZ, said the trend for dairy prices was in the right direction and production volumes were strong, but weather could affect the payout.

"Over the last little while, it's certainly got drier but there's also been a bit of rain over the last few days . . . probably the driest parts of the country are not traditional dairying areas anyway." Fairfax NZ

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