Volume cut helps dairy prices to four-month high
07.12.2011 13:31 "Agro Perspectiva" (Kyiv) —
Dairy prices rose at a second successive globalDairyTrade auction for the first time since March, and to a four month high, helped by competitive bidding in milk fat encouraged by a cut in volumes for sale.
An index of dairy prices compiled by globalDairyTrade, which is run by Fonterra, the world’s biggest milk exporter, rose 2.6% at Tuesday’s auction, matching the rise at the last event, three weeks ago.
The rise in the index to its highest level since the start of August was led by butter milk powder, which sold at $3,410 a tonne, a rise of 14.4% on the last auction.
However, anhydrous milk fat, as used in croissants, chocolates and ice cream, was a strong riser too, increasing at a rate of 12.0% from the last auction, to an average price of $4,013 a tonne.
Competitive tension
The increase in anhydrous milk fat prices followed globalDairyTrade’s decision to cut by 20% the volume of offered at the auction, after values at the auction fell to a sharp discount to prices elsewhere.
GlBroader market prices for anhydrous milk fat were $3,900 a tonne last week, according to New Zealand-based Agrifax, compared with the $3,571 a tonne at which the product sold at the November 15 globalDairyTrade auction.
«The reduction in globalDairyTrade anhydrous milk fat volumes is expected to help close up the price gap,» Agrifax said on Monday.
Prices of other milk products showed smaller rises, with whole milk powder appreciating by 2.0% from the last event, albeit to an average of $3,637 a tonne, the highest since June.
Skim milk prices rose 2.6% to an average of $3,424 a tonne, although the value of the product offered by DairyAmerica, the only group outside Fonterra to sell through the auction, fell 2.7%.
Murray Goulburn, the Australian dairy co-operative, revealed last Thursday that it too would start selling product through globalDairyTrade, from April 3.
Supply vs demand
The rise in dairy prices defies expectations from many forecasters of a dip in values.
«More-than-sizeable milk production increases in Argentina, New Zealand, some countries in Europe, Australia, and the US are outstripping the international demand for dairy products,» John Kaczor at the US-based Milk Producers Council said.
However, there are signs of some pullbacks ahead, with a New Zealand pasture index compiled by NZX tumbling last month as many dairy farms, notably in North Island where most are based, experienced a dearth of rain.
The index, «a measure of potential pasture growth, dropped sharply over the past week as moisture levels fell across much of the North Island», Agrifax said.
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