Dairy prices at auction reverse falls

Fonterra's flagship product, whole milk powder,  reversed its fall in the latest dairy auction....
Fonterra's flagship product, whole milk powder, reversed its fall in the latest dairy auction. Photo by Peter McIntosh.
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 issue.

''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 auction.

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 said.

However, there remained some potential for ''modest trade impacts'' until New Zealand restored its reputation for safety and quality.

 

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