Dairy product prices increase amid outlook for lower supply

Dairy product prices rose at the Global Dairy Trade auction, as whole milk powder increased on the outlook for reduced supply from Fonterra, the world's top dairy exporter.

The GDT price index rose 2.2 percent from the previous auction two weeks ago to US$3,124. Some 25,400 tonnes of product was sold, down from 29,592 tonnes two weeks ago.

Whole milk powder rallied 4.2 percent to US$2,886 a tonne.

"Last week Fonterra announced that it now expects its milk intakes for the 2017-18 season to be about 4 percent lower than last season as dry conditions limit pasture production," Amy Castleton, AgriHQ dairy analyst, said in a note. "It also advised that it had started to reduce the volume of whole milk powder (WMP) available on the GDT platform in response to the lower outlook for its milk supply."

"The reduction in the volume of WMP available at this auction and subsequent GDT events led the market to believe a substantial lift in price would occur," Castleton said, adding that the NZX Dairy Derivatives market had closed for the New Year holiday period before Fonterra advised the cut in its milk production forecast.

"The direction of the price movement was aligned with market expectations although the lift in the price of regular grade WMP for March delivery of 3.5 percent was well below the 6 percent anticipated by NZX Dairy Derivatives market participants," according to Castleton.

At the latest GDT auction, skim milk powder gained 1.6 percent to US$1,699 a tonne, while butter rose 0.6 percent to US$4,501 a tonne.

Meanwhile, butter milk powder dropped 7.3 percent to US1,866 a tonne, while cheddar declined 2.1 percent to US$3,317 a tonne.

Rennet casein fell 1.1 percent to US$4,419 a tonne, while anhydrous milk fat slipped 0.2 percent to US$6,405 a tonne.

No prices were available for lactose.

The New Zealand dollar last traded at 71.08 US cents as of 12.46pm in New York, compared with 71.05 US cents at the previous close in Wellington.

There were 112 winning bidders out of 158 participating at the 16-round auction. The number of qualified bidders rose to 516, up from 509 at the previous auction.

(BusinessDesk)

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