2 Jun 2016

Second rise in global dairy prices

1:15 pm on 2 June 2016

Dairy prices rose overall in the lastest global auction - but the key whole milk powder price slipped back.

The GlobalDairyTrade index went up 3.4 percent at the overnight auctio to an average $US2,329 a tonne.

It is the second rise in a row following a 2.6 percent increase at the previous sale two weeks ago.

However the important whole milk powder price - which largely determines the payout to dairy farmers - fell 1.7 percent to $US$2,205 a tonne.

no caption

Graphic: GlobalDairyTrade Ltd

Waikato University professor of agribusiness, Jacqueline Rowarth said the auction showed price recovery would be slow and the industry was in for another tough season.

She told told Morning Report the results show it will be a slow price recovery.

"There is some bouyancy, but we are by no means out of the woods.

"Forecasts are very difficult to make."

She said Fonterra was right to be getting out of commodities - such as whole milk powder - and to go into value added products.

Production falls predicted

A rural economist says New Zealand milk production could fall as much as 5 percent during the new 2016/17 dairy season.

Dairy cooperative Fonterra has set a conservative farmer payout forecast for this season of $4.25 per kilogram of milk solids.

ASB rural economist Nathan Penny said farmers had already reacted to low prices by reducing milk production and that was expected to continue.

"On top of the expected 2 percent fall, or so, in the season just gone, we expect at least another 3 percent fall in the new season - possibly as high as a 5 percent fall."

ASB is forecasting a payout of $6 per kilogram of milk solids by the end of the season in May next year, on expectations dairy prices would climb later in the season.

Get the RNZ app

for ad-free news and current affairs