Dairy prices rise, amid doubts over NZ prospects

Dairy prices started 2013 on a firm note at GlobalDairyTrade auction, rising to their highest in nearly a year, amid doubts over prospects for milk output in New Zealand, the top exporting country.

Prices at the first GlobalDairyTrade of the year rose 2.0% from the last event, two weeks ago, to their strongest since mid-January last year, according to an auction index.

The increase was led by skim milk powder, prices of which soared 4.7% to a 19-month top of $3,572 a tonne, as an average of the contracts on offer.

Cheddar prices rose 1.9% to $3,458 a tonne. Values of whole milk powder, which makes up the vast majority of volumes on offer at GlobalDairyTrade, rose 1.6% to $3,199 a tonne, although still not enough to avoid extending their, atypical, discount to skim milk powder prices.

Volume cutbacks

The price rises tally with a drop in overall volumes on offer by Fonterra, which runs the auction and provides the majority of product sold through it.

Fonterra reduced by 11% the volume of its own anhydrous milk fat on offer, and by one-third the quantity of its skim milk powder for sale, cutbacks reflecting availability at the time contracts on offer at GlobalDairyTrade come up for physical delivery.

The volume of whole milk powder was nudged 3.3% higher to 31,000 tonnes.

New Zealand slowdown?

The price rises also come amid doubts that New Zealand will be able to maintain its strong start to 2012-13 for milk output, with production rising 6.5% in the June-to-October period, the first five months of the marketing year.

Rabobank has warned ago that "dry conditions were threatening in some parts through November".

And analysts at consultancy Agrifax cautioned that a pasture growth index showed growth potential had been "below normal" for much of December.

New Zealand milk production has not since December 2010 shown a year on year decline.

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