Prices up 16.9pc in Fonterra's latest dairy auction

Prices have risen 16.9 per cent in Fonterra's latest online dairy auction held overnight.

Paul Grave, globalDairyTrade Manager, said the result appeared "to indicate a firmer tone has returned to the market over the last month."

The average selling price of all products rose to $US3562 ($NZ5009) from $US3080 at the start of August.

The next auction will be held in two weeks; time on 15 September 2010.

"Having two events a month will provide a lot more visibility when it comes to assessing the market direction," said Grave. Auctions were previously held once a month.

Skim milk powder prices were up 15.8 per cent, and whole milk powder was up 18.8 per cent.

Late last month Fonterra confirmed it was holding to its forecast payout potentially worth billions as international prices showd signs of strengthening later in the season.

A $7.10 payout based on stable production levels could be worth about $9.1 billion to its 10,500 farmers.

Chairman Henry van der Heyden said in August that although international prices had declined in recent months, there were a number of factors signalling a potential improvement later in the year.

"While there is still some uncertainty in global markets, if current commodity pricing and foreign exchange rates were at current levels for the rest of the season, then we estimate the 2010/11 payout would be marginally lower than our current forecast," van der Heyden said.

"However, we are holding the forecast payout of $6.90-7.10 as we are seeing signs of potential strengthening of international prices further into the season."

Chief executive Andrew Ferrier said last month current season was at an early stage and the outlook finely balanced.

"On the one hand, the New Zealand dollar remained relatively strong, prices for dairy ingredients had fallen from their April peak and there is some evidence global economic growth is slowing," Ferrier said.

"On the other hand, weather in Europe, Russia, Pakistan and parts of China has affected agricultural production, although the extent of the impact on dairy is unknown," he said.

The fundamentals for global markets continue to point to balanced supply and demand, Ferrier said.

- HERALD ONLINE