Dairy prices rise, as casein fights back

Dairy prices rose for a third successive GlobalDairyTrade auction led this time by the likes of casein, whose relatively poor performance prompted Fonterra, which runs the events, to warn of a profits drop.

The GlobalDairyTrade index nudged 0.2% higher to 1,466 points, its third highest ever, and the strongest since April's record high of 1,573.

The increase came despite a fall of 1.5% in prices of whole milk powder, which represent the bulk of volumes on sale, although Fonterra had cautioned of a drop to 30,000 tonnes in offers of the product, from 34,500 tonnes at the previous auction.

However, prices of rennet casein soared 7.3% to their highest ever at their two years on GlobalDairyTrade, and up 25% in the past two auctions.

Prices of butter were also notably strong, rising by 7.9% to an average of $4,051 a tonne, the highest in seven months.

Powder premium

The strong performance by casein contrasts with a caution by Fonterra that the relatively lowly price of the cheese ingredient, and protein food supplement, compared with values of milk powders was holding back the co-operative's profits.

Fonterra last week, as it unveiled expectations of a halving in profits and slashed its dividend guidance, said that its inability to lift above 70% the proportion of its milk powder in its offering had opened up an $800m value gap.

Demand for milk powder imports is being spurred by the growing reliance in China on bottle feeding, as mothers go out to work, and with confidence compromised over the safety of domestic dairy products.

Shares in Fonterra's shareholders fund, which touched an all-time low of NZ$5.48 in Auckland after last week's profit warning, closed on Wednesday at NZ$5.70, down 1.4% on the day.

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