Dairy prices rise as dry weather impacts Kiwi production
International milk prices posted their sharpest rise since May on Wednesday, as supply tightened in the world’s largest exporter, New Zealand.
The Global Dairy Trade Price Index (GDT) gained 2.2pc at the first auction of the year, after the world’s biggest dairy processor, Fonterra, dropped its forecast for New Zealand milk collection last week for the second time in as many months.
The average selling price was of $3,124 per tonne, with prices for whole milk powder - the most widely traded product - posting the strongest gain, 4.2pc.
“There’s a growing realization that it’s quite serious, the situation in New Zealand, and I think prices have reacted to that,” Susan Kilsby, dairy analyst at Agri HQ told Reuters.
“It’s really dry right across New Zealand’s dairy regions, and that means lower pasture growth and subsequent low milk production.
Fonterra last week said it expected the dry weather to persist, and cut its collection forecast for the 2017-2018 season by nearly 3pc.
The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade. It already announced last month it was cutting its forecast payout to farmers for the season by NZ$0.35 ($0.25) to NZ$6.40 per kg of milk solids.
Skim milk powder prices rose 1.6pc, and butter prices rose for the first time since October.