Prices rose 10.1 per cent at the overnight GlobalDairy Trade (GDT) auction, driven by a big jump in the key whole milk powder category.
The average winning price at the auction was US$3366 (NZ$4469) a tonne, up from US$3042 at the previous auction two weeks ago.
The trade-weighted GDT price index hit a five-year low in December, but has lifted at the last five fortnightly auctions.
It is now at its highest level since July.
Despite increased prices, volumes continued to fall with 22,957 tonnes sold, down sharply from 28,705 tonnes at the previous auction.
The New Zealand dollar took a kneejerk jump higher before being dragged back down this morning, recently trading at US75.43c and A96.49c.
BNZ currency strategist Raiko Shareef said the strong dairy prices were largely due to the drought conditions curtailing supply.
«The net impact of higher prices but lower production is still negative for New Zealand,» he said.
While the kiwi was tipped to move higher against the Australian dollar overnight, it failed to push through its recent post-float highs.
«We’re still struggling to track higher,» Shareef said.
«There is a little bit of a cap present with the kiwi-aussie cross where it is, around A96.60c.»
Following the auction, AgriHQ lifted its Seasonal Farmgate Milk Price forecast for the 2014-15 season by 15 cents a kilogram of milk solids to $4.70/kg, the same as Fonterra’s forecast.
AgriHQ dairy analyst Susan Kilsby said Fonterra’s milk price forecast for this season now looked achievable.
Trading on the NZX Dairy Futures market suggested prices needed to move up by another 10 per cent for the $4.70 to be attained, she said.
Kilsby said dairy markets continued to gain ground rapidly as buyer demand was increasing at a time when the volume of product available through the GDT platform was low.
«Buyers are looking to secure purchases now as they are aware milk powder could become more expensive in the coming months,» she said.
Whole milk powder performed strongly at the auction overnight, up 13.7 per cent, while cheddar prices jumped 16.8 per cent.
All categories saw price increases, with anhydrous milk fat up 6.4 per cent, skim milk powder up 5.7 per cent, butter milk powder up 1.9 per cent, rennet casein up 1.2 per cent, and butter up 1.1 per cent.
Source: Stuff
