Dairy product prices edge up for second straight auction

UPDATED 11am: Market expectations for GDT miss by a mile

Dairy product prices increased in the latest GlobalDairyTrade auction, moving higher for a second straight auction, though the gains were less than expected amid concern about worldwide excess supply.

The GDT average winning prices added 1.9% to $US2458, up from $US2,419 at the previous auction two weeks ago. Some 24,888 tonnes of product was sold, down from 28,158 tonnes two weeks ago.

"It was disappointing that the GDT prices didn't move up by as much as the market anticipated," AgriHQ dairy analyst Susan Kilsby said in a note. "However, the results are not surprising given that demand for dairy commodities is still weak relative to global milk supply."

The AgriHQ 2015-16 Farmgate Milk Price climbed 19 cents to $4.67 per kilogram milksolids. This is comparable with Fonterra's current 2015-16 milk price forecast of $4.60/kgMS.

"The lift in the AgriHQ 2015-16 Farmgate Milk Price was primarily driven up by the strength of the NZX Dairy Futures market in the run up to GDT," Ms Kilsby noted. "The lift in the GDT prices also provided some support but these gains were smaller than expected."

Butter rose 9.0% to $US3136 a tonne, while lactose increased 6.8% to $US542 a tonne, and anhydrous milk fat advanced 6.1% to $US3721 a tonne.

Whole milk powder added 1.8% to $US2304 a tonne.

The later-dated whole milk powder contracts traded "at a small premium" over the nearby contracts at the auction, Kilsby said.

"The premium was less than it was at the previous auction indicating buyers are less concerned about securing supply for later in the season than they previously were," according to Ms Kilsby.

Cheddar gained 1.1% to $US2856 a tonne, while skim milk powder eked out a 0.2% increase to $US1891 a tonne.

However, rennet casein dropped 9.5% to $US4541 a tonne, and butter milk powder slid 6.1% to $US1564 a tonne.

The New Zealand dollar last traded at 67.51USc at about 11.40am in New York, compared with 67.59USc at 5pm in Wellington the previous day.

There were 112 winning bidders out of 161 participating bidders at the 10-round auction. The number of qualified bidders was 613, the same as at the last auction.

(BusinessDesk)