The average price of dairy product sold on GlobalDairyTrade topped
$5,000 a tonne for the first time as prices of premium products, such as milk
protein concentrate, soared, outpacing a flat milk powder market.
The average sales price of dairy products sold at the
auction, run by New Zealand giant Fonterra, hit $5,025 a tonne, up 1.7% from
the previous event, two weeks ago – and up 46% year on year.
The increase reflected in part a drop of 5,000 tonnes in the
volume for sale of whole milk powder, which accounts for the majority of
product on offer, and is a relatively low-value contract.
However, it also reflected a jump in the prices being paid
of higher value products such as milk protein concentrate, as used in the likes
of sports drinks, which saw a 7.2% rise in values to an average of $9,657 a
The increase comes despite decent supply prospects, with milk
output in New Zealand, the top exporting country, running 3.0% higher year on
year in November, and output strong in Europe too.
UK output for the two weeks after Christmas was 9.9% higher
than a year before, with total December output the highest for the month in 18
years, while Ireland faces a E30m-40m penalty for production beyond its quota.
"With the continued monthly increases in production it is
almost certain that Ireland will now exceed its milk quota allocation at the
end of the milk quota year [in March] and that some suppliers will incur a
superlevy fine," Simon Coveney, Ireland's minister for agriculture, said on
However, the market "seems to be about demand rather than
supply", said John Lancaster, dairy analyst at INTL FCStone.
"Demand seems to be insatiable at the moment," largely from
key importers such as China and Russia.
The GlobalDairyTrade results showed that "premium products
now appear to be doing better than commodity products", a reversal of the
dynamics which drive Fonterra last month to caution on its profits.
However, Mr Lancaster told Agrimoney.com that it was "hard
to say from a couple of auctions" whether this represented more than a short-term
'Driving the market'
Protein was faring particularly well, "driving the market", Mr
Lancaster, based in FC Stone's Dublin office, said.
Milk protein concentrate has now risen in price by 61% over
the past year.
However, butter is also in demand, with GlobalDairyTrade
prices up 15.0% so far in 2014.