The latest rise in world dairy prices of 3.6 per cent was positive and added stability to the industry as farmers geared up for winter, Federated Farmers says.
Slightly against expectations, prices lifted at the Global Dairy Trade auction overnight, with New Zealand’s major export commodity, whole milk powder, receiving a boost of 5.2 per cent to US$3233 (NZ$4670) a metric tonne.
Since the early March trough, WMP prices have gained 16 per cent. It was the fourth straight rise in prices – after surges of 1.7 per cent on March 21, 1.6 per cent on April 4 and 3.1 per cent on April 18.
Federated Farmers dairy vice-chairman Wayne Langford said the upswing would be welcome after two difficult years.
“A lot of farmers are not yet out of the woods, so this result is good as everyone is setting up for the next season,” the Takaka-based Langford said.
Flooding brought on by Cyclone Cook and Cyclone Debbie had pushed dairy prices up at the last auction, but the dairy futures market had been predicting prices would flatline at this week’s event.
AgriHQ said the result exceeded market expectations and it had been feared the10 per cent lift in New Zealand’s milk supply during March would have had an adverse impact, but in fact there was keen buyer demand.
Milk production across the European Union has been rising steadily for the past four months and is now approaching levels seen last year.
According to the latest official data, daily production in February was just 5.3 million litres a day lower than last year. The recent gains are mostly due to increased output from Italy, Poland, France and the UK.
North Asian buyers were especially active at the auction, reflecting a lack of profitability in China’s own dairy farming sector which has limited expansion of some farming operations and is expected to affect their domestic milk supply.
Westpac analyst Sarah Drought said prices seemed to be responding to concerns about New Zealand supply off the back of recent poor weather.
“This season’s production is largely done and dusted, and it’s not clear to us that next season’s production will be significantly impacted. What’s more, European production has turned in recent months and is expected to trend higher over the remainder of this year as farmers respond to higher farmgate prices. We expect rising global supply to weigh on prices over the second half of this year.”
Westpac was forecasting a farmgate payout of $6 per kilogram of milksolids for the current 2016-17 season, in line with Fonterra’s forecast, edging higher to $6.10 next season.
There were 163 participating bidders, with a total of 22,633 metric tonnes of product sold.