Fonterra milk powder prices unexpectedly rise

Wednesday 3rd March 2010

The price of whole milk powder unexpectedly rose this month in Fonterra Cooperative Group’s online trading auction, though long-term contracts were weaker, hinting that the slight gain may be a blip.

The average price for whole milk powder rose 0.8% to US$3,281 a tonne, according to the globalDairyTrade website managed by CRA International, that’s 79% higher than the low in July. Still, prices for the third contract, when powder between September and November this year, fell 2.5% to US$3,204 a tonne.

“The difference between short-term contracts rising and long-term contracts falling was interesting,” said Doug Steel, economist at Bank of New Zealand. “Prices aren’t going to tear away upwards any time soon.”

The gain in whole milk powder was the first this year after a 1.6% fall last month and dropped 7% in January. Dairy prices fell 7.6% last month, according to the ANZ Commodity Price Index, after they surged last year and underpinned the series’ performance.

Steel said it’s too early to say whether the gain in whole milk powder this month is indicative of a longer trend, though it does damp some of the downward pressure ahead of the Northern Hemisphere boosting production.

Paul Grave, globalDairyTrade manager, said the result was pleasing, though there’s still an “element of uncertainty as to how supply and demand factors will influence prices over the coming months.”

The average price of anhydrous milk fat fell 5.4% to US$3,959 per tonne, its lowest price since Fonterra first started offering it on the platform in February. The event included skim milk powder for the first time, which sold at an average price of US$2,927.

New Zealand’s dairy exports declined in 12 months through January, with milk powder, butter and cheese sliding 12% to $8.12 billion, while casein and caseinates sank 27% to $751 million.

Dairy products account for about 22% of the country’s annual $39.7 billion worth of exports.

Businesswire.co.nz

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