April 21, 2011
New Zealand's dairy prices remain uncorrected due to demand
A rectification in dairy prices, which cost them 10%, were postponed at the most recent Fonterra auction, due to strong demand for whole milk powder in the midst of a wind-down in southern hemisphere output.
Dairy prices at the New Zealand dairy giant's latest globalDairyTrade auction rose for the first time since early March albeit by only 0.1%, and with anhydrous milk fat and skimmed milk powder chalking up further losses.
Whole milk powder was the best performer, with an average rise of 0.8% across all contracts. However, even then prices remained below US$4,000 a tonne, among their lowest for four months.
The revival came as milk output in New Zealand, the world's top dairy exporter, slides heading into the winter, depressing quantities of Fonterra product up for sale.
The amount of whole milk powder offered, at some 7,000 tonnes, was less than one-third in October, when southern hemisphere producers enjoy a so-called spring flush in output as cows are put out to pasture, and grass quality improves.
Meanwhile, demand has been spurred by strong buying by major importers, such as China and North Africa.
Indeed, export data from the US, among the northern hemisphere producers to which demand is showing a seasonal switch, has shown a more-than doubling in cheese shipments in the December-February period.
The data helped Chicago cheese prices rose last week for the first time since the start of March.
A near-doubling in US exports of butter and butterfat, on the back of stocks at multi-year lows, also sparked higher prices in this market for the first time in three weeks.
"Generally, the outlook for international sales and price levels appears to be very bright," John Kazor at the US-based Milk Producers Council said.
"The immediate reason for the optimism is the tightness between international dairy product supply and demand. Supplies were coming in lower than expected and demand coming in higher than expected."
