Milkpowder prices up to 15-month high in Fonterra auctions

Milk powder prices have continued to march higher, climbing for the fifth straight month on Fonterra's online trading auction to a 15-month high as demand for dairy products remained resilient after last year's slump.

The average price of whole milk powder advanced 3.6 per cent to US$3,560 per metric ton, according to the globalDairyTrade website, the highest since August last year and a 95 per cent surge from its low in July. The price of anhydrous milk fat fell 8.6 per cent to US$4,349 per metric ton.

"It's a very good result in that prices have remained stable," said Kevin Wilson, ANZ National Bank rural economist. "Forward prices didn't have as big a premium which suggests buyers are not so desperate to secure supply."

Fonterra expects dairy prices to begin easing when the milking season in America and Europe begins in March/April next year, and global trade managing director Kelvin Wickham says the current prices are above the long-term sustainable average.

Surging dairy prices have helped underpin the recovery in New Zealand's commodities as buyers restock their depleted inventories after they ran them down in the wake of the global financial crisis.

Manager of globalDairyTrade Paul Grave said the market was still supported by tight supply, though Fonterra expects more price volatility next year as suppliers respond to the surge since July.

Gains in commodities have been offset by a steadily climbing New Zealand dollar, which has surged about 47 per cent from its sub-50 US cents low in March. The kiwi recently traded at 72.70 cents from 72.79 cents before the results were announced.

New Zealand's exports of milk powder, butter and cheese slumped 32 per cent in October to $677 million from a year earlier, while casein and caseinates tumbled 43 per cent to $58 million. Dairy products account for about 23 per cent of the country's annual $40.7 billion worth of exports.