Dairy prices surge 10 per cent at latest auction

Dairy prices posted their fifth consecutive gain at this morning's GlobalDairyTrade auction, the GDT price index surging by 10.1 per cent since the last auction a fortnight ago.

Analysts had expected prices to firm in response to lower supply brought on by drought conditions on the east coasts of both the North and South Islands.

See more details of today's auction here:

Whole milk prices - the most important product for New Zealand producers - traded at US$3272 a tonne, up 13.7 per cent from the last sale.

Elsewhere, prices were up across the board, with skim milk powder - the second most important product - gaining 5.7 per cent to US$2744 a tonne.

The auction will give farmers some confidence that Fonterra will meet its $4.70 a kg milk price forecast for the current season after prices slumped by 50 per cent in 2014.

However, farm investment company MyFarm estimates the current forecast is well below its estimated average cost of production of $5.03 kg.

Fonterra has said that whole milk prices would need to hit US$3500 by July for the current forecast to eventuate.

AgriHQ dairy analyst Susan Kilsby said Fonterra's milk price forecast for the current season now looks achievable providing prices continue to rise through the remainder of the season at the rate currently indicated by the NZX Dairy Futures market.

Ahead of the auction, whole milk powder was trading on the NZX market at US$3,700 a tonne for the July 2015 contract. "This suggests that prices still need to move up by another 10 per cent for the $4.70 milk price to be attained," Kilsby said in a commentary.

At the previous auction on February 4, prices gained 9.4 per cent and whole milk prices spiked up by 19.2 per cent, driven mostly by reduced supply offered by Fonterra.

Today, anhydrous milk fat prices were up by 6.4 per cent, butter by 1.1 per cent, butter milk powder by 1.9 per cent, cheddar by 16.8 per cent and rennet casein up by 1.2 per cent.