The global dairy trade price index slipped 0.1 per cent from the previous auction a fortnight ago. Prices for whole milk powder, which has the most impact on what farmers are paid, gained 0.4 per cent to an average US$4097 (NZ$5713) a tonne.
Whole milk powder prices are 51 per cent higher than at the same time last year, largely driven by China where a wealthier population and an increased focus on health and wellbeing after the Covid-19 pandemic is stoking demand for better nutrition.
“Whole milk powder demand remains strong, with this auction seeing North Asian buyers back in force, taking back their usual positions as the major buyer,” said NZX analyst Stu Davison.
”After the last auction, where we saw other regions take more than usual, it’s obvious that the demand is still there globally.”
At the latest auction, 99 per cent of the whole milk powder on offer was sold, he said.
Prices for skim milk powder were unchanged, while cheddar gained. Prices for butter, anhydrous milkfat and lactose fell.
Davison said he wasn’t surprised that both of the cream group products fell, given the extra volume of butter on offer and the price gains seen for both fats over the last six months.
Fonterra Cooperative Group has indicated it is producing more butter to benefit from improved returns relative to other products.
Dairy products are the country’s largest commodity export and Fonterra estimated milk payments to its 10,000 farmer suppliers for this season would contribute about $11.5 billion to the economy.
“Overall, the prices achieved at last night’s event still bode extremely well for export returns and farmgate returns,” said ANZ agriculture economist Susan Kilsby.
Last month, Fonterra raised its forecast milk price for this season to between $7.30 and $7.90 per kilogram of milk solids, with a mid-point of $7.60 per kgMS.
Kilsby is forecasting $7.70 per kgMS for this season, ahead of Fonterra’s mid-point and the $7.64 per kgMS closing price on the futures market on Tuesday.
For next season, Kilsby is forecasting a milk price of $7.30 per kgMS, lagging behind the futures market price of $7.50 per kgMS.