Farm Ireland

Friday 22 March 2019

Dairy prices jump to eight-month high, but whole milk powder lags

Charlotte Greenfield

Global dairy prices rose to a nine-month high at a fortnightly auction held early on Wednesday but prices for the key product, whole milk powder, were largely flat.

The Global Dairy Trade (GDT) Price Index climbed 1.9pc to an average selling price of $3,637 per tonne in the auction held in the early hours of the morning.

That suggested a 1.1pc drop at the previous sale was a temporary dip and the gradual recovery in prices was back on track.

Gains were led by anhydrous milk fat, which rose 5.8, while skpcim milk powder jumped 3pc.

"Skim milk powder (SMP) was also stronger than expected," said Amy Castleton, dairy analyst at AgriHQ.

"SMP likely found some support from less product being available."

However, whole milk powder, the most-traded item, was only up a touch at 0.2pc.

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Nathan Penny of ASB Bank said as we anticipated a month ago global butter prices have spiked higher.

"The global butter shortage has become more acute on the back of soft NZ production this season. Recall that NZ exports nearly double the amount of butter than the other major exporters combined.

"Accordingly, butter prices have spiked by around 30% so far this year and are only 4% below the record levels set back in September 2017".

The auction results can affect the New Zealand dollar as the dairy sector generates more than 7pc of the nation's gross domestic product.

But the tepid result for whole milk powder, the country's main goods export, and a rally in the U.S. dollar meant investors largely ignored the auction and the currency dropped to a six-month low of $0.6862.

A total of 18,161 tonnes was sold at the latest auction, falling 6.9 percent from the previous one, the auction platform said.

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