Another big dairy price increase at auction

(File)
(File)

There has been another big increase in prices at the latest GlobalDairyTrade (GDT) auction.

The GDT Price Index rose 10.9 percent.

That follows a rise of 14.8 percent two weeks ago.

Whole Milk Powder (WMP), a crucial product for Fonterra, rose 12.1 percent to US$2078 a tonne.

Prices have now risen for two successive auctions after falling for five months.

Farmers and analysts had been expecting an increase in prices this morning. The trading of futures contracts for dairy products had suggested prices would rise by double digits.

The improved prices were helped by Fonterra's decision to offer fewer products at the auction.

WMP volumes totalled 18,000 tonnes. This is 50 percent lower than the same auction a year ago.

Fonterra will still need to find buyers for the product that is not being sold at the auction.

The co-operative will be selling about 70 percent of its product outside of the auction.

Fonterra is also predicting that its overall production will be down by 2 percent this season.

The rise in prices is needed if Fonterra is to be certain of achieving its current forecast payout to farmers of $3.85 per kilogram of milk solids.

The auction comes the day after Fonterra announced farmers can now apply for a loan to help them deal with the current downturn in prices.

Farmer shareholders can apply for an interest-free loan of 50 cents for every kilogram of share-backed milk solids produced from June 1 to December 31, 2015. The loan will be interest-free until May 31, 2017. After that period Fonterra may charge interest.

The loan will be repayable directly from milk payments, and automatic repayments will occur when Total Advance Rate Payments exceed $6.

Farmers have until 5pm on September 25, 2015 to apply for a loan.

But the loan is not being offered to sharemilkers.

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