Dairy prices continued to accelerate in the latest
GlobalDairyTrade auction, as dry conditions in the North
Island squeeze milk production.
Overall, prices rose 3.1% on a trade-weighted basis this
week, building on the buoyant start to 2013 in the first
three auctions of the year.
The trade-weighted dairy price index has risen in eight of
the past nine auctions and, in the four auctions to start
2013, prices have lifted 9%.
Whole milk powder prices led the way in this week's auction,
increasing 5.8%. Whole milk powder was now trading at a
premium to skim milk powder for the first time since October.
Anhydrous milk fat and butter milk powder also posted solid
gains, both rising about 4%.
Dry weather in the North Island was slowing milk production
faster than normal for this time of year, particularly in the
Waikato and Taranaki, Westpac economist Nathan Penny said.
South Island production was faring much better, with
Canterbury and Southland continuing to post solid production
gains compared to a year ago.
Milk production for season to date, as at December 2012, was
up about 7% on the previous season. However, more recent
indicators showed that falling in January and February, Mr
Overall, for the season ending May 2013, he expected annual
production growth to be flat or up to 1%.
He expected prices to continue to rise over the first half of
the year, with the tightening supply conditions in New
Zealand, coupled with rising Asian growth, particularly in
China, providing upward pressure.
Primary Industries Minister Nathan Guy has welcomed a new
accord for the dairy industry, aimed at lifting environmental
performance on dairy farms.
He described the draft Sustainable Dairying: Water Accord as
''a real step forward'' which showed the industry was serious
about improving its practices.
It was more comprehensive than the Clean Streams Accord,
which it would replace, as it would cover all dairy farmers,
not just Fonterra suppliers, he said.
The Accord aimed to have 100% exclusion of dairy cattle from
significant waterways by 2017, for farms to manage nitrogen
levels, and had strict conditions for new dairy farm
It will now be taken to farmers for consultation and formally
launched in time for the 2013-14 season.