Dairy product prices rise with butter and cheddar

Dairy product prices rose in the latest GlobalDairyTrade auction, as gains in the price of butter and cheddar outweighed declines in the price of anhydrous milk fat, whole milk powder and rennet casein.

The GDT average winning price rose 0.24% to $US3374, from $US3366 at the previous auction two weeks ago. Some 22,094 tonnes of product was sold, down from 22,957 tonnes two weeks ago.

After the latest GDT auction, the AgriHQ Seasonal Farmgate Milk Price for the 2014-15 season has increased by 5c a kilogram milksolids to $4.75/kgMS. This is comparable with Fonterra's $4.70/kgMS forecast which the company reconfirmed last week.

"The small increase in the milk price forecast was brought about by a slightly stronger NZX Dairy Futures market, which improved the price outlook for the remainder of the season," AgriHQ dairy analyst Susan Kilsby said in a note. "Milk intakes have not fallen quite as quickly as previously anticipated and Fonterra has replaced some of the product that was earlier removed from GDT.

"Buyers' fears that [New Zealand] suppliers would not be able to meet demand have been dispelled somewhat," according to Kilsby. "NZX Dairy Futures market prices were gaining ground until Fonterra's surprise announcement that GDT volumes would be increased again. At that point futures prices eased back and further easing is likely to occur in the coming weeks due to the weaker GDT result."

Cheddar rallied 10.8% to $US3377 a tonne, while butter milk powder climbed 6.8% to $US2681 a tonne, and skim milk powder increased 5.9% to $US2935 a tonne.

Butter rose 2.5% to $US3912 a tonne.

Rennet casein slipped 0.7% to $US8694 a tonne, while whole milk powder fell 1.0% to $US3241 a tonne. Anhydrous milk fat declined 2.2% to $US4237 a tonne.

Lactose was not offered at the latest event.

Sweet whey powder was not offered, not sold, or sold at its starting price in either the current event and/or in the previous two events.

Despite Fonterra adding an extra 8300 tonnes to its GDT forecast volumes for the March to July period, the amount of whole milk powder on offer on GDT is still 40% below year ago levels, Kilsby said.

The AgriHQ Snapshot Farmgate Milk Price indicates that if the GDT prices from the March 3 auction were achieved across the entire season this would equate to a milk price of $6.15/kgMS, which is unchanged from the previous auction. The weaker whole milk powder price was offset by a stronger butter price and a reduction in the lactose price, which is a cost to Fonterra.

The New Zealand dollar last traded at 75.67USc at about 12:23pm in New York, compared with 75.10USc at 5pm in Wellington on Tuesday.

There were 107 winning bidders out of 160 participating bidders at the 14-round auction. The number of qualified bidders rose to 703, up from 694 at the last auction.

(BusinessDesk)