18 Jun 2014

Global dairy prices up 0.9 percent

1:35 pm on 18 June 2014

Global dairy prices have risen for the first time since February. The average selling price in the fortnightly auction increased by 0.9 percent to $US3800 per tonne.

Benchmark whole milk powder rose by 2.4 percent and butter milk powder rose by 17 percent.

But the global dairy trade index is still below where it stood in March last year.

The volume that was traded was also down, to less than 32,000 tonnes.

ASB Bank rural economist at ASB Bank Nathan Penny said , based on similar trends in the past, dairy prices should stabilise further over the coming auctions.

"After eight consecutive falls in the global dairy auction prices, the small rise indicates the first tentative steps towards those prices stabilising," he said.

"From auction to auction you do tend to get a bit of volatility but in general we expect prices to stabilise further over the next few auctions and then for them even to recover over the second half of the year."

China production up

Meanwhile, Synlait managing director John Penno said dairy prices had been declining because China's milk production was up.

Chinese companies bought large amounts of overseas milk powder earlier this year, which had been blamed for the drop in prices.

However, Mr Penno said Chinese buyers had not been stockpiling and that their stocks were probably higher than average because they misjudged the strength of local production, which was up due to favourable weather this year.

European milk production was also up.

"For the Chinese to be stockpiling, they would be buying strongly and stacking it in the market - holding it at home," he said.

"There probably are higher-than-normal stocks in China right at the moment, and if anything that's meaning that they're not buying quite as much as they might sometimes.

"But it's very difficult to get good information on what's sitting in the large customers' warehouses, the big manufacturing companies who buy a product to manufacture their products in China."