World dairy prices seen to stay firm

 

 

World prices for some dairy prices are likely to stay firm over the next six months, but may struggle to push much higher, according to Fonterra.

 

Fonterra, which controls about one-third of the world's dairy exports, said the rise of more than 50 percent in whole milk powder price over the past two months may be hard to sustain.

 

The whole milk powder price is a lead indicator for the sector.

 

It would not be surprising if current prices dropped or increased 10 percent within the next three months, said Kelvin Wickham, managing director of Fonterra Global Trade.

 

Last week Fonterra reported a 24.2-percent lift in the average selling price for whole milk powder in an Internet auction to US$2,858 a tonne. That followed a 26-percent rise in August.

 

Wickham said the recent lift has come with low inventories and improved demand for value added consumer dairy products.

 

Dairy products account for around a quarter of New Zealand's export earnings, which touched NZ$42.8 billion (US$30.1 billion) in the year to July 31.

 

If the EU were to reduce their subsidies even by a nominal amount, that would definitely underpin the firming in price, he said.

 

Meanwhile, the strength of the New Zealand dollar is crimping returns to New Zealand's near 11,000 dairy farmers, who are facing a 12.5-percent fall in the forecast payout for the 2009-10 season, despite the improvement in prices.