May 17, 2010

Global dairy prices appear to have stabilised at high levels after sharp recent jumps.

The world's leading dairy export company, New Zealand-based Fonterra, last week said its latest monthly internet auction had seen a 0.8% fall in prices across all short-term contracts for its three main products.

According to the company's new trade-weighted price index, the average auction price came in at AUD4,423 (US$3,942) a tonne. Managing director of Fonterra Ingredients Australia, Bruce Donnison said it was a "pretty good result" given the volatility in the dairy market over the past two years.

"Since the start of 2008, we've seen prices move in a range of AUD2,000-AUD5,555 (US$1,783-US$4,951)," he said. "That's unprecedented and it has created great challenges for farmers, processors and customers. So a bit of price stability is welcome."

The May result followed a 21-25% jump in prices at last month's globalDairyTrade auction, which prompted the company to lift current season payouts to New Zealand suppliers by 31 cents to AUD4.68kg/milk solid (US$4.17).

Fonterra offers about 20,000 tonnes of dairy produce at its monthly auction, including about 5,000 tonnes of Australian produce, with provision to buy forward in increments of three months.