Surge in milk powder prices

The price of milk powder has surged 21 per cent from March and is now more than double than the market low of almost a year ago.

The announcement from Fonterra's internet auction comes as the Australasian product season draws to a close, prompting increase demand for its product and causing the New Zealand dollar to rise by one cent.

The price for whole milk powder rose to US$3969 per tonne with skim milk powder posting the biggest increase of 25.5 per cent to US$3672 per tonne.

The average price for anhydrous milk fat rose 21.9 per cent to US$4827 per tonne.

Paul Grave, globalDairyTrade manager said the results reflected a tightening in supply as the production season in this part of the world drew to a close.

"It's a good result for the market. We expected a price movement, but probably not of this magnitude," he said.

The company also managed to sell US$100 million of product overnight, which was significant for the New Zealand business, he said.

Grave said dairy prices were extremely difficult to predict and it was hard to know, moving forward how the prices might track.

"The key is going to be consumer demand. Sustained economic recovery is necessary for these prices to be maintained and to grow," he said.

"If this price level is sustained then long-term it will result in more profitability among farmers and more reinvestment in their farms and business," he said.

The next globalDairyTrade will be held on May 4, 2010.

- INTEREST.CO.NZ, additional reporting by NZHERALD STAFF