Fonterra's flagship product, whole milk powder, reversed
its fall in the latest dairy auction. Photo by Peter
Fonterra's contamination scare continues to have little
impact on dairy prices, with this week's GlobalDairyTrade
auction up 2.3%.
Prices were now back where they started, following the whey
contamination issue, with the increase effectively wiping out
the 2.4% fall in the previous auction, Westpac economist
Nathan Penny said.
The world continued to pay high prices for New Zealand dairy
products. Prices were the fourth highest on record and more
than 62% higher than a year ago.
Importantly, prices for Fonterra's flagship product, whole
milk powder, more than reversed their falls from the previous
auction, increasing 2.7% after the previous 1.6% fall.
Whole milk prices were about $5000/metric tonne, indicating
that confidence had returned to the market, Mr Penny said.
Fonterra's skim milk prices did continue to fall relative to
its competitors, while Dairy America and Amul's prices rose.
In the one directly comparable product, Fonterra's premium
over Dairy America narrowed further from 14% to 6%. However,
Mr Penny did not attribute that all to the contamination
''Fonterra skim milk powder volumes were up 8% compared to
the previous auction and, while we don't have their
competitors' volumes, with the northern season winding down,
we suspect they may have been lower than at the previous
Also, the overall movements in Fonterra and Dairy America
butter prices favoured Fonterra,'' he said.
With prices holding firm to date, Fonterra's forecast milk
price payout of $7.50/kg of milk solids for the current
season remained on track, ASB chief economist Nick Tuffley
However, there remained some potential for ''modest trade
impacts'' until New Zealand restored its reputation for
safety and quality.