4 Mar 2010

Milk powder prices rise in latest auction

7:25 am on 4 March 2010

Milk powder prices in Fonterra's global online auction edged up this month, reversing two months of declines.

The average whole milk powder price is up 0.8%% on last month, to $US3,281 a tonne.

In February, prices fell 1.6% and dropped 7% in January.

Fonterra says demand is holding up for the moment, particularly from China, but its uncertain what effect an increase in European milk production will have on prices.

Global dairy trade manager Paul Graves says the big question is how strong consumer demand will be during economic recovery, though demand from Asia remains strong, particularly from China.

Anhydrous milk fat was the only category to fall in price, slipping 5.4% to $US3,959 a tonne due to drop in demand.

For first time, skim milk powder was included in Fonterra's online auction, selling for an average price of $US2,927 a tonne.

BNZ markets economist Doug Steel says the sector is in reasonable heart, and Fonterra remains on target to pay above average returns to its farmer shareholders.

However he says longer term contracts weakened, and expects prices to ease back to about $3000 a tonne in coming months.