UPDATE: Buyers securing milk powder supply as production dries up

Wednesday 7th April 2010

Fonterra Cooperative Group put today's 21% surge in the price of whole milk powder on its online auction trading platform down to tighter supply as Australia and New Zealand near the end of the production season.

Paul Graves, manager of Fonterra's globalDairyTrade platform, said "production is down in Australia and the upper North Island is very dry - milk is drying up quicker than what we thought."

This had been compounded by a cold winter in Europe that had pushed back the start to the Northern Hemisphere's production season, he said.

"We anticipated there would be a slight increase, but the move was greater than what anyone in the market was anticipating," he told BusinessWire.

Buyers "appear to have paid to secure supply" with price rises across all timeframes, he said.

The average price for whole milk powder jumped 21% to US$3,969 a tonne, according to the globalDairyTrade website managed by CRI International, from a month earlier.

That's the highest level since the first auction in July 2008, and more than double last year's trough in July. It followed yesterday's data release showing a record high reading on the ANZ Commodity Price Index for March.

The gain was the second this year, after last month's 0.8% gain, though dairy prices dropped 1.2% on the ANZ commodity index last month.

Graves said the sustainability of the gain would rely on the strength of consumer demand, though the result indicated the ongoing volatility of dairy prices and that it's "incredibly difficult to predict" their direction.

The average price for anhydrous milk fat jumped 22% to US$4,827 per tonne, its highest level since it began trading on the platform, while skim milk powder surged 26% to US$3,672 a tonne in its second event.

New Zealand exports of milk powder, butter and cheese arrested their decline in February, gaining 2.5% to $757 million from the same month a year earlier, though casein and caseinates tumbled 40% to $55 million over the same period.

Dairy products account for some 22% of New Zealand's $39.5 billion worth of exports.

Businesswire.co.nz

Comments from our readers

No comments yet