Dairy prices rebound at latest GlobalDairyTrade auction

Dairy prices rebound at latest GlobalDairyTrade auction

Prices have leapt at today's global dairy auction.

The GlobalDairyTrade price index rose by 6.6 percent to US$2,436 per metric tonne. It follows the last auction two weeks ago, in which the average price did not move.

Whole milk powder, which is New Zealand's major dairy export product, leapt by 9.9 percent today to US$2,265.

Skim milk powder rose by 2.1 percent to US$1,965. The average butter price increased by 6.6. percent to US$2,871.

The cheddar index increased by just 0.8 percent to US$2,889.

On Monday Fonterra announced it was sticking with its forecast milk payment for this season of $4.25 per kilogram of milk solids. It also announced that forecast earnings for this season will be in the range of between 50 and 60 cents per share.

Monday was the first time Fonterra had offered guidance on this season's likely dividend payment.

The forecast earnings would take the total available payout this season for shareholder farmers to between $4.75 and $4.85. That is below Dairy New Zealand's estimated break-even point of $5.05. It was lowered this week from the previous estimate of $5.20.

Fonterra chief executive Theo Spierings told farmers the returns from the ingredients, consumer and food service businesses continue to grow in-line with Fonterra's business strategy to convert more milk into higher-returning products.

The co-operative's chairman John Wilson said: "The recent weakening of the euro, combined with the continued strength of the New Zealand dollar, has meant a price advantage for European export dairy products.

"We expect global milk supply and demand to come into balance over the course of this season. Farmers globally are producing less milk in response to lower prices and we are forecasting a 3 percent reduction in our New Zealand milk collection for this season."

The New Zealand dollar was trading at 72.27 US cents at 5am today, 95.08 Australian cents, 54.19 British pence and 64.39 euro cents.