World dairy prices rise for second time in 2016

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Dairy product prices rose overnight the second advance in the seven Global Dairy Trade auctions held so far in 2016. The GDT price index rose 2.1 percent.

The average price slipped to US$2,188, down from US$2,190 at the previous auction three weeks ago. Some 22,682 tonnes of product was sold, up from 20,406 tonnes at the previous auction three weeks ago.

Whole milk powder rose 1.5 percent to US$2,013 a tonne.

"It was a pleasant surprise to see some prices lift on the GDT auction overnight as there is not a lot of positivity in the market at present," AgriHQ dairy analyst Susan Kilsby said in a note.

"In Europe product continues to flood into the government-backed intervention programs as milk production continues to expand."

Following the GDT auction, the AgriHQ 2015-16 Farmgate Milk Price has fallen 8 cents to $4.06 per kilogram milksolids. This compares to Fonterra's current forecast of $3.90/kgMS.

The fall in the AgriHQ 2015-16 milk price forecast was primarily driven by prices easing in the NZX Dairy Futures market over the past three weeks, according to Kilsby.

Hear Chicago dairy analyst Brian Rice speak to Early Edition's Rachel Smalley about the world dairy market:

Rennet casein climbed 11.8 percent to US$4,438 a tonne, while cheddar advanced 10.5 percent to US$2,778 a tonne.

Anhydrous milk fat increased 6.7 percent to US$3,203 a tonne, lactose rose 6.2 percent to US$661 a tonne, while skim milk powder edged 0.1 percent higher to US$1,721 a tonne.

"The majority of Europe's extra milk is being made into skim milk powder and butter which will keep prices for these commodities subdued for some time," Kilsby noted.

"However the price of whole milk powder and anhydrous milk fat is less influenced by the European market. A decrease in New Zealand's milk supply will provide some support to the price of these two commodities."

Butter fell 2 percent to US$2,702 a tonne, while butter milk powder dropped 8.2 percent to US$1,395 a tonne.

The New Zealand dollar last traded at 68.02 US cents at about 11.40am in New York, compared with 68.34 US cents at 5pm in Wellington the previous day.

There were 119 winning bidders out of 163 participating bidders at the 15-round auction. The number of qualified bidders rose to 615, up from 606 at the previous auction.