Dairy prices rose to a 19-month high at GlobalDairyTrade, amid
growing concerns that dry weather is prompting a sharp slowdown in milk production
in New Zealand, the top exporting country.
at the auction, which is run by Auckland-based Fonterra, the top dairy
exporting company, rose 3.1% from the last event, two weeks ago, to the
strongest since July 2011.
The rise was led by whole milk powder, which forms the bulk
of volumes sold, and of which values soared by 5.8% to a two-year high.
New Zealand is a particularly strong exporter of whole milk
powder, with its shipments set to hit 1.3m tonnes this year – three times as
much as those from the second-ranked European Union - on US Department of
Signally, prices of whole milk powder were particularly strong
for further-ahead contracts, soaring 8.0% for delivery in July, around the low
point of the New Zealand production season.
Data out overnight from industry group Dcanz showed that New
Zealand's milk production continued to rise in December, hitting 2.60m tonnes,
up 6.7% year on year.
However, Agrifax, the New Zealand-based consultancy, flagged
that the country's North Island "remains dry", with the "majority of the island
at least 20mm drier than normal for this time of year".
"From a milk production perspective, Waikato is the region
where the impact will likely be seen the most, with February bringing less than
50% of the normal amount of rainfall to most parts.
"If these conditions persist it will likely see farmers
dropping back to once-a-day milking and/or drying off earlier than they would
generally been increasing'
Abroad, the UK-based DairyCo bureau flagged that "New
Zealand has continued to suffer with drier-than-normal weather which has mainly
affected the North Island", adding that output from other regions was depressed
"With weather and feed costs continuing to impact milk
production global supplies remain tight. As a result prices have generally been
increasing or stable," DairyCo said.
Prices of anhydrous milk fat and butter milk powder also
rose particularly strongly at the GlobalDairyTrade event, rising 4%.
Last week, Rabobank cautioned that dairy prices would
"continue to trend" upwards as importers' appetites increase at a
time of notable decline in output from New Zealand.
rise in prices again coincided with falling volumes on offer by Fonterra, which
runs the auction and provides the majority of product sold through it.
total volume on offer equated to 33,467 tonnes, a drop of 12.6% on the previous
Fonterra recently announced plans to cut the volume of milk
products sold in GlobalDairyTrade auctions by around 3% to 850,000 tonnes.
detection of dicyandiamide (DCD) in New Zealand dairy products has also created
concerns, prompting officials to address the need for testing regimes and