The price index at the auction, run by Fonterra, rose by 1.4%, with prices of whole milk powder – which accounts for the majority of volumes sold – gaining 2.9% to an average of $2,268 a tonne.
The gain followed a reduction by Fonterra, of 930 tonnes of whole milk powder and 50 tonnes of cheddar cheese, in the volumes offered at the event.
Export surpluses in the EU are expected to reduce year-on-year by over 3.4m tonnes in the second half of 2016, more than any time since the global financial crisis, with a further 2.5m tonnes reduction predicted in 2017.
‘Chinese buyers back’
Furthermore, commentators said that buyers from South East Asia and China returned to the market after Golden Week holiday, which coincided with the previous GlobalDairyTrade event.
«A lot of market participants were missing during the last GDT,» said Dave Kurzawski, senior broker at FC Stone.
«They have now come back to the market, and that has led prices up.»
In fact, Chinese demand of late has been encouraged by disappointing domestic production, according to Rabobank, which expects the country to continue its high levels of imports.
GDT vs futures
Nonetheless, the gain in whole milk powder prices fell short of the 10% indicated by futures on New Zealand’s NZX market.
In fact, the price move at the event – and at the previous auction when values fell – «reflected the market participants who were present,» said Jon Spainhour, a trader with Chicago broker Rice Dairy.
«Two weeks ago, there were a lot of Middle Eastern buyers, but no South East Asian buyers.
«This week the South East Asian buyers returned, but the Middle Eastern ones did not,» he told Agrimoney.com.
‘Trying to find stability’
The question was now whether GlobalDairyTrade prices would rise to meet futures – vice versa.
«The futures may now go lower or they may continue trading at a premium, as higher prices might be expected in the next auction,» Mr Spainhour said
FC Stone’s Mr Kurzawski said the market was consolidating recent gains, and would not rise further.
«The market is now trying to find some stability at these prices,» he said.
Source: Agrimoney
Link: http://www.agrimoney.com/news/dairy-prices-revive-a-bit-as-chinese-buyers-return–10040.html