Dairy prices weaken 3.8% at overnight global auction; remain elevated

Dairy prices eased in the overnight global auction following a surge higher at the previous event, although prices remain elevated amid strong demand.
The average price across global dairy trade products fell 3.8 per cent. The price of whole milk powder, which has the most impact on what farmers are paid, dropped 6.2 per cent to an average US$4083 a tonne.

The pullback follows a 15 per cent jump in average prices and a 21 per cent rise in the price of whole milk powder at the previous auction two weeks ago, which prompted Fonterra Cooperative Group to lift its forecast milk payment to farmers. Fonterra is seeing strong demand from China as its economy recovers from Covid-19 although it is wary of increased production from the European Union and the United States, and the impact of the pandemic on key markets.

Whilst not as exciting as the previous GDT event, this auction has sent some strong signals for the industry on the whole, said NZX senior analyst Amy Castleton. There is little doubt now that whole milk powder prices will remain elevated for the short term with this level of demand being shown.


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She noted that whole milk powder prices remained above US$4000/t even with increased volumes. The latest auction confirms demand remains strong for whole milk powder, with 98 per cent of the product offered being sold, she said.

There was strong demand for whole milk powder from North Asia, which took the vast majority of the quantity offered, she said.

Fonterra is due to report its first-half earnings on Wednesday.

Dairy products are the countrys largest commodity export.

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