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Dairy prices extend gains, as world production tightens

Milk prices on the GlobalDairyTrade auction site hit their highest level in over two years, as the dairy market recovery continues.

Prices at the GlobalDairyTrade auction were up 3.5% from the last event, held two weeks ago.

Prices for benchmark whole milk powder rose almost 5%, to their highest level June 2014.

Before the auction was held, Tobin Gorey at CBA saw the New Zealand futures market pointing to a 3 to 5% rise in whole milk powder prices.

Prices rally

Dairy prices have been rallying since July, fuelled by ideas of tighter world supply, and increased buying from Asia.

Whole milk powder prices are up 73% in the last four and a half months

And whole milk powder prices are increasing their premium to skimmed milk prices, helped by the good Asian demand as well as ideas that the EU may release stocks of skimmed milk powder onto the market.

Brighter outlook

Late last week the US Milk Producers Council said that the prospect for dairy prices "looks brighter".

"This is largely due to a significant slowdown in overseas milk output," the council said.

"Oceania milk production peaks in October, and this year's flush was not impressive."

New Zealand production was down, and in Australia the October peak production fell below 1bn litre for the first time since the turn of the century.

Chinese buying

"Milk production remains depressed in South America and is waning in Europe," the council said.

And in China, milk production is falling thanks to the falling dairy herd.

"The shortfall in Chinese milk production has helped to boost imports," the Council said.

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