The global dairy trade price index increased 1 per cent at the fortnightly auction. That follows a 4 per cent gain at the previous auction, which was the biggest increase since early March, when it jumped 15 per cent.
“The previous auction resulted in a sharp hike in prices, across all products on offer, and gave the market some direction,” said NZX dairy analyst Stuart Davison. “This auction has solidified those results overall, while also confirming to the market that dairy products are still in hot demand globally.”
The average price for whole milk powder, which has the most impact on what farmers are paid, increased 2.2 per cent to an average US$3777 (NZ$5383) a tonne, with gains across all contract periods. The average price is sitting 24 per cent higher than at the same time last year.
Fonterra has been reducing the amount of whole milk powder it offers on the auction platform, saying it has “extremely strong” contract demand and expectations for flat milk supply this season will limit its ability to increase production.
Davison noted that buyers from South East Asia were the dominant purchasers of whole milk powder at the latest auction, unseating buyers from North Asia who typically dominated.
Chinese buyers had purchased large amounts of whole milk powder over previous months and may also be purchasing more through contracts, he said.
New Zealand is heading into its peak milk production period.
Fonterra has forecast a record opening milk price for farmers this season, underpinned by an improving global economy, and strong demand for dairy relative to supply.
The co-operative has announced an opening forecast for the 2021/22 season of between $7.25 per kilogram of milk solids to $8.75 per kgMS, with a mid-point of $8 per kgMS. Its previous highest ever opening price was $7 per kgMS.
The mid-point of the forecast would see the co-operative contributing more than $12 billion to the economy.