Dairy product prices soar 14.8 percent to two-year high on drought effect

Prices of dairy products surged to the highest in two years in Fonterra’s latest GlobalDairyTrade auction as drought curtails production in the North Island.

The GDT-TWI Price Index rose 14.8 percent compared to the last sale two weeks ago, the biggest increase since the Sept. 1, 2010, sale and the seventh straight gain. The average winning price rose to US$4,683 a tonne from US$4,216 a metric tonne. Whole milk powder, the biggest product by volume, jumped 21 percent to US$5,116 a tonne.

Finance Minister Bill English said the government has lifted its estimate for the drought impact on the economy to $2 billion as dairy farmers dry off their herds earlier than usual and send livestock for slaughter in the face of stunted pasture. The kiwi dollar traded at 82.32 US cents from as high as 82.56 cents before the auction results were published.

The total volume of dairy products sold at the latest auction was 15,994 tonnes, down from 21,922 tonnes a fortnight ago and the smallest since the May 17, 2011, sale.

The price of anhydrous milk fat rose 16.3 percent to US$4,416 a tonne and butter milk powder rose 8.6 percent to US$3,904 a tonne. Butter rose 11.5 percent to US$4,550 a tonne and cheddar gained 13.7 percent to US$4,315 a tonne.

Lactose and milk protein concentrate weren’t offered. Rennet casein rose 3.1 percent to US$9,242 a tonne and skim milk powder rose 7.7 percent to US4,050 a tonne.

There were 82 winning bidders over 17 rounds. There were 185 participating bidders out of a total number of qualified bidders of 785.