Dairy prices extended to nearly 30% their revival over the
last six months, helped by a jump in cheddar prices, and despite talk of New
Zealand farmers boosting output well beyond even last year's bumper levels.
Dairy prices at the latest GlobalDairyTrade auction rose by
an average of 0.7% from the last event, two weeks ago, taking values to their
highest since February.
The increase was led by a 12.4% leap in prices of cheddar,
reflecting a convergence of values between the US, where cheese has traded
strongly since the summer, and those of the GlobalDairyTrade, which is based in
New Zealand, the top dairy exporting country.
"Demand is pretty good for cheese," Robert Chesler,
vice-president at FCStone's food service division, said.
"But production has been limited in Oceania, which has
tended to use milk for making powders," popular in key Asian markets, such as
China, for uses such as infant formula.
The rise in GlobalDairyTrade cheese price offset a slight
weakening in prices of most other products, including whole milk powder, which
makes up the bulk of volumes on offer, and dropped for a second successive auction.
However, even the latest decline, of 1.9%, could be "construed
as bullish", given the talk of New Zealand milk output enjoying another strong
season, after rising 11.1% to 19.9m tonnes in 2011-12, on industry data.
"We are hearing reports that New Zealand milk production is
rising very significantly," Mr Chesler told Agrimoney.com.
Talk suggested a rise of 6-10%, "and I believe towards the
upper end of that," he said, ahead of field trip to New Zealand.
Given the rise that output growth suggests to milk powder
production, "with prices holding up pretty well, that suggests demand is still
'Considerable genetic potential'
Strong growth in New Zealand's milk output, from largely
pasture-based farms, would contrast with a downward trend in output in many
northern hemisphere countries, such as the US, where producers are more
dependent on feed, whose price has been elevated by the grains rally.
While European Union output rose 0.1% in the April-to-August
period, growth was concentrated in Poland – at 7.2% - with the likes of
Germany, the Netherlands and the UK seeing declines.
New Zealand's strong milk output reflects another season of
decent weather for pasture growth, besides a switch by farmers from sheep to
dairy, and herd investment.
The country's recent record of rising milk output is "testament
to the considerable genetic potential of the New Zealand dairy herd that was
just waiting for the right environmental conditions to be expressed", US Department of Agriculture staff in Wellington said last month.
Nonetheless, they forecast a drop in milk output in calendar
2013, the first for five years.
"The run of excellent weather conditions has to come to an
end at some point, and with it the extraordinary production increases," they