Prices lifted 1.4% in this week's GlobalDairyTrade auction
with an apparent convergence in product prices being cited as
encouraging for Fonterra.
In December, the co-operative left its forecast milk price
unchanged at $8.30 due to the disparity between milk powder
prices and other products.
Its cheese and casein stream was lagging behind its milk
powders stream, where extremely high prices had been
recorded, but production was at full capacity.
The mix of price changes in the latest auction was
encouraging, with the cheese and casein stream products all
posting large gains, casein rising 4.2% after posting a 7.3%
gain two weeks ago, ASB economists said.
In contrast, the milk powder stream products were a mixed bag
again, with whole milk powder and anhydrous milk fat posting
gains of 0.1% and 2.2%, respectively, while skim milk powder
Overall, dairy markets remained tight and prices were well
supported. Fonterra's milk powder production constraints had
added to the tightness, ASB said.
Westpac senior economist Anne Boniface said strong prices
suggested demand from China for dairy products continued to
''We continue to expect to see dairy prices moderate in 2014
as global supply ramps up but it is starting to look as
though this won't happen until closer to the middle of the
year,'' Ms Boniface said.
Domestically, production continued to run well ahead of last
season, and the comparisons would only get more favourable as
the season moved into the period where drought hit production
hard in 2013. Nationwide production was 5.5% ahead of last
year for the six months to November and she expected it to be
up around 8.5% by the end of the season.