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Tuesday 11 December 2018

Global dairy price bounce could prove to be temporary as NZ supply ramps up

  • Dairy prices rise 2.2 pct at fortnightly auction
  • First rise since May

Charlotte Greenfield

Global dairy prices rose for the first time in six months at a fortnightly auction held early on Wednesday as lower volumes of key products were offered at the sale.

The GDT Price Index climbed 2.2pc, the first rise since May, to an average selling price of $2,819 per tonne.

The index had fallen 3.5pc at the previous sale.

Prices have been falling on ramped up supply from New Zealand, the world’s top dairy exporter, but lower volumes offered by dairy giant Fonterra had supported prices at the latest auction, according to analysts.

Prices for whole milk powder, the most heavily traded item, rose 2.5pc.

A total of 36,450 tonnes was sold falling 15.2pc from the previous one, the auction platform said on its website.

The price rally could prove to be temporary as New Zealand dairy supply ramped up and good weather conditions were expected to support production over the coming summer months.

“On this basis, we look through the result overnight and expect that dairy prices are on the whole likely to remain soft over the next few months,” said Nathan Penny, senior rural economist at ASB Bank.

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

However the kiwi began to ease off its six-month high of $0.6969 in the hours before the auction, as trade concerns dominated the currency’s trajectory. The auction results could not stop its losses and the currency was trading around $0.6931 by Wednesday morning.

GDT Events is owned by New Zealand’s Fonterra but operates independently from the dairy giant.

The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.

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