Dairy product prices jump as worldwide surplus falls

Wednesday 17th August 2016

Dairy product prices soared, rallying more than anticipated, at the Global Dairy Trade auction amid signs that the worldwide supply glut is easing, bolstering optimism about the outlook.

The GDT price index gained 12.7 percent to US$2,731, up from US$2,436 at the previous auction two weeks ago. Some 37,766 tonnes of product was sold, up from 34,928 tonnes at the previous auction two weeks ago.

“It was a stunning result and it couldn't have come at a better time for our farmers,” AgriHQ dairy analyst Susan Kilsby said in a note. “I think it is now safe to say the market has turned a corner.”

Whole milk powder surged 18.9 percent to US$2,695 a tonne.

The derivatives market had anticipated an increase of 11.5 percent, according to Kilsby.

“This is an impressive result, given Fonterra offer volumes of whole milk powder are at their highest level for the season, at 21,500 tonnes,” said Kilsby, adding that whole milk powder prices are now 45 percent above year-ago levels.

“Last year we saw a similar result with prices lifting at this time of the season only to fall away again in October,” Kilsby noted. “This season I am more confident that prices will be able to hold up as global milk supply is now retracting rather than growing.”

At the GDT auction, butter milk powder jumped 18.1 percent to US$1,983 a tonne, while butter increased 14.1 percent to US$3,274 a tonne.

Cheddar climbed 8.9 percent to US$3,157 a tonne, while anhydrous milk fat gained 8.4 percent to US$4,148 a tonne.

Lactose rose 3.5 percent to US$763 a tonne, while skim milk powder added 3.0 percent to US$2,028 a tonne, and rennet casein rose 2.5 percent to US$6,326 a tonne.

The New Zealand dollar last traded at 72.69 US cents at about 12.52pm in New York, compared with 72.11 US cents at 5pm in Wellington the previous day.

There were 119 winning bidders out of 177 participating bidders at the 17-round auction. The number of qualified bidders rose to 606, up from 605 at the previous auction.

BusinessDesk.co.nz

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