Global dairy prices have risen sharply for the third auction in a row, with prices coming close to farmers’ break-even range.
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In light of the new found signs of a decline in global production which is now under the influence of a persisting weakness in price as the 19 bloc Eurozone plans to embark on a 1.1 billion liters production within the next few months through a voluntary scheme to cut output.
The GDT Price Index, which covers a variety of products and contract periods, climbed 7.7 percent, with an average selling price of $2,920 per ton, in the auction held on Tuesday.
At the latest GDT auction, whole milk powder increased 3.7 per cent to US$2793 a tonne.
Among the other increases anhydrous milk fat prices rose by 15.4 per cent to US$4769 a tonne, butter was up 14.9 per cent to price $3764/tonne and butter milk powder was up 6.8 per cent to an average price of US$2070/tonne.
“Milk fats were the stars of this auction”, Van Ossenbruggen noted.
The New Zealand dollar last traded at US74.13 cents at about 1.09pm in NY, compared with US73.05c at 5pm in Wellington the previous day. There is also a high level of anticipation for production declines in Australia and the United Kingdom, after the recent spates of price weakness have driven New Zealand production considerably low and has driven many farmers out of business.
It followed two consecutive rises in the past month, with a 12.7 percent increase in prices at the most recent auction. At the time the kiwi was trading at 73 U.S. cents.
Whole milk powder prices have rallied by 35 per cent since July.
Fonterra’s forecast is up 12 per cent to approximately 19 pence per litre (NZ$4.75 per kg of milk solids), while Westland’s has risen 4 per cent to around 18-20ppl (NZ$4.55-4.95 per kg of milk solids).
Fonterra said last month that current global prices were still at “unrealistically low levels”.
It also expects earnings of 50 to 60 cents per share. That would take the total payout available to shareholder farmers to between $5.25 and $5.35.
“Milk production is reducing in most dairying regions globally in response to low milk prices, and this is bringing the world’s milk supply and demand back into balance”, it said in a statement.
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The New Zealand dollar benefited from the result and was trading at 0.7415 early in New Zealand.
