Dairy prices hit 2.5-year high


Global dairy prices have risen to a two-and-a-half year high.

Prices rose by 3.5 percent overall at this morning's GlobalDairyTrade auction. That was the eighth increase in the past nine auctions.

The increase in supply has been helped by a tightening of supply.

New Zealand's biggest dairy export product, whole milk powder, increased by 4.9 percent today to an average price of US$3,593 per metric tonne.

That is the highest level for the whole milk powder category since June 2014.

The skim milk powder index rose by 1.4 percent to US$2,570/mt.

Cheddar rose by 2.2 percent to US$3,752/mt and butter increased by 1.7 percent to US$4,262/mt.

The only category to drop in price was butter milk powder, which fell by 2.6 percent to US$2,408/mt.

The rise in global dairy prices in recent months has seen Fonterra and other companies lift their forecasts for this season's payments to their farmers.

Both Fonterra and Synlait are forecasting a payout of $6/kg of milk solids.

Miraka is forecasting between $5.80 and $6.00, Open Country Dairy is forecasting $5.60 to $5.9 and Westland Milk Products has a forecast price of $5.50 to $5.90.

The Reserve Bank says prices now exceed the average operating costs for the dairy sector.

Dairy New Zealand's current estimate for the average breakeven point is $5.05/kg of milk solids.