Dairy product prices rise 14.2 percent to record as drought shrinks volumes

Prices of dairy products surged to a record in Fonterra’s latest GlobalDairyTrade auction as traders competed for a shrinking volume of milk powder in the face of the continuing impact of drought.

The GDT-TWI Price Index rose 14.2 percent compared to the last sale two weeks ago, the eighth straight gain. The average winning price rose to US$4,966 a tonne, the highest on record on the GDT platform that began in July 2008, from US$4,683 a tonne two weeks ago. Whole milk powder, the biggest product by volume, rose 7.7 percent to US$5,100 a tonne.

The total volume of dairy products sold at the latest auction was 13,912 tonnes, down from 15,994 tonnes a fortnight ago and the smallest since the May 17, 2011, sale. Fonterra last month cut its forecast for milk production this season, saying there would be no increase from last year as farmers dry off their herds.

Whole milk powder has been leading gains in New Zealand commodity prices, which surged 7.4 percent in March, the third-biggest gain since at least 1986, according to the ANZ Commodity Price Index.

The price of anhydrous milk fat rose 6.7 percent to US$4,695 a tonne and butter milk powder rose 0.8 percent to US$4,595 a tonne. Butter fell 2.7 percent to US$4,425 a tonne and cheddar gained 6.6 percent to US$4,622 a tonne.

Lactose and milk protein concentrate weren’t offered. Rennet casein rose 4.4 percent to US$9,489 a tonne and skim milk powder soared 27.8 percent to US$5,142 a tonne.

There were 78 winning bidders over 18 rounds. There were 171 participating bidders out of a total number of qualified bidders of 793.