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Record highs for cheddar and butter prices were achieved in this week’s Global Dairy Trade auction which also marked the trading platform’s 300th trading event.
Overall prices rose 4.6% — to their highest level for since March 2014 — while key whole milk powder prices lifted by 5.6%. Butter was up 5% to $US6158 ($NZ9081) a tonne
The result largely matched expectations, Westpac senior economist Nathan Penny said.
Weakness in New Zealand dairy production was expected to further underpin global dairy prices, at least in the short term. After a run of cold and wet weather earlier in the season, dry weather was now compounding the weakness in production, Mr Penny said.
Fonterra last week lowered its milk collections forecast for the season by 1.6% while production in other key regions such as the European Union and United States was similarly sluggish.
This week’s result cemented Westpac’s 2021-22 farmgate milk price at $9 per kilogram of milk solids (kgMS). In the short term, the risks to that forecast were "mostly on the upside", he said.
Ongoing dry weather could put additional dents in New Zealand production and push prices higher again while Omicron-related supply chain issues could also lead prices higher.
ASB has revised its 2021-22 farmgate milk price up to $9.10/kgMS. The underlying global dairy demand and supply balance should keep prices supported over the rest of the season, economist Nathaniel Keall said.
Global Dairy Trade director Eric Hansen said more than $US30billion had been traded on GDT Events since it was established in 2008, which equated to just over ninemillion tonnes traded.