Fonterra milk powder prices hold April gains amid short global supply

Wednesday 5th May 2010

The price of whole milk powder held most of last month's unexpected surge in this morning's Fonterra Cooperative Group's online trading auction as short global supply underpinned demand for New Zealand's biggest export.

The average price for whole milk powder slipped 1.2% to US$3,932 per tonne, according to the globalDairyTrade website managed by CRI International, from a month earlier.

That's still more than double last year's trough in July, and followed yesterday's data release showing a new record high reading in the ANZ Commodity Price Index.

The first two contracts for whole milk powder declined, the third contract, which covers November to January delivery, gained 3.5% to US$3,908, as buyers look to secure their supply in anticipation of continued demand.

"The average price was a really good result considering it came off a 20% surge last month. The current levels suggest fairly decent milk prices for the next season," said Khoon Goh, senior markets economist at ANZ New Zealand.

"Security of supply is paramount for some firms out there, and that will support fairly good prices further out in the contract."

The gain was the third this year on the trading platform, and are helping underpin New Zealand's export recovery. Reserve Bank of New Zealand Governor Alan Bollard last week said the nation's trading partners had bounced back from the global financial crisis faster than expected, and this was being borne out in the nation's export receipts.

Last week, Fonterra, the world's largest dairy exporter, raised its forecast pay-out to farmers by 95 cents $6.05 per kilogram of milk solids.

The average price for anhydrous milk fat gained 4.4% to US$5,020 per tonne, while the average price for skim milk powder slipped 1.6% to US$3,612. The trade-weighted globalDairyTrade index, a measure of the average price across all products, edged down 0.8%.

New Zealand exports of milk powder, butter and cheese surged 19% to $969 million in March from the same month a year earlier, though casein and caseinates slumped 37% to $61 million over the same period.

Dairy products account for some 23% of New Zealand's $39.5 billion worth of exports.

Businesswire.co.nz

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