Fonterra dairy prices up again

18:16, Feb 20 2013

Prices at Fonterra's latest online dairy auction have risen for the fifth straight session, and farmers could be in clover as dry conditions keep prices high.

The overall price index for Fonterra's GlobalDairyTrade auction on Tuesday night rose 3.1 per cent, with an average winning price of US$3756 (NZ$4472) per tonne.

Sale prices for wholemilk powder rose 5.8 per cent, and are up 16 per cent since the start of this year. The largest products category by volume, wholemilk powder accounts for about 60 per cent of the basket that determines farm-gate returns.

ANZ chief economist Cameron Bagrie said there could be a bit more upside to Fonterra's guidance for the 2012-13 season, which was $5.50 per kilogram of milksolids plus dividends.

"The underlying demand story's been quite good, and mother nature's been quite dry," he said.

North Island farms are in a dry spell that is putting pressure on supply towards the end of the season, where there is traditionally a glut of milk production.


Bagrie said the farm-gate price could be revised upwards in the order of 10c to 20c.

The high exchange rate would continue to take some of the gloss off recent auction returns, with the kiwi dollar consistently trading around the US84c mark this year. However, Bagrie pointed out the rise in dairy prices had outpaced the kiwi's ascent.

BNZ economist Doug Steel said there would be scope to lift Fonterra's payout, but any rise would not be large as it was coming towards the end of the season.

Steel agreed there was likely to be more upward pressure on dairy prices in the remaining months.

"Until we get that northern hemisphere flush, it feels like supply is going to be relatively tight," he said. Another strong demand indicator from the auction was that there was a record number of bidders, many of whom went away empty-handed.

The auction saw 216 participants out of 771 qualified bidders take part, with 135 winning bids.

Six of the nine product categories showed price gains. Two of the categories were not traded, and one fell. Whole milk powder led gainers.

The sole decliner was milk protein concentrate, which eased 0.2 per cent. Fairfax NZ

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