Dairy product prices climb amid concern about a drop in supply

Dairy product prices rose at the GlobalDairyTrade auction amid concern about a decline in New Zealand's supply following dry weather conditions.

The GDT price index rose 4.9 percent from the previous auction two weeks ago. The average price was US$3,310 a tonne. Some 23,319 tonnes of product was sold, down from 25,400 tonnes two weeks ago.

Whole milk powder climbed 5.1 percent to US$3,010 a tonne.

"This result follows Fonterra's release [on Tuesday] that its December milk collections were down 6 percent year-on-year due to dry, hot conditions on-farm in New Zealand," Amy Castleton, AgriHQ dairy analyst, said in a note, adding that Fonterra is now forecasting milk collections 3 percent behind those of last season.

"Buyers have not been paying much attention to New Zealand's dry conditions to date, as the effects of poor pasture production had not yet flowed through to milk production statistics," Castleton noted. "But this appears to have turned around at this week's GDT event."

At the latest GDT auction, butter jumped 8.8 percent to US$4,897 a tonne, while skim milk powder rallied 6.5 percent to US$1,818 a tonne.

Rennet casein gained 5.5 percent to US$4,709 a tonne, while cheddar increased 5.2 percent to US$3,486 a tonne.

Anhydrous milk fat rose 2.2 percent to US$6,547 a tonne, while lactose traded at US$397 a tonne.

Butter milk powder was not offered at this event.

There were 129 winning bidders out of 200 participating at the 14-round auction. The number of qualified bidders edged up to 517, from 516 at the previous auction.

Fonterra has just launched a new fresh milk product in China in partnership with Hema Fresh, a new retial concept from Alibaba which combines bricks-and-mortar shopping with digital. The fresh milk is sourced from Fonterra's farm hub in Hebei province with initial volumes small at three metric tonnes daily. The 750ml bottles will be sold at Hema's 14 stores in Shanghai and Suzhou.

At Hema, consumers can either shop instore using their mobile phones to browse and purchase or order online for a 30-minute delivery within a three kilometre radius of each store. Hema also uses data it gathers on shoppers to make them personalised offers.

(BusinessDesk)