Dairy product prices rose for the first time since March at the most recent Fonterra Global Dairy Trade (GDT) auction.

The event comes on the back of 10 negative auctions for prices in a row and with the GDT index now over 50% lower than the highs seen in February 2014.

Average prices paid at the auction rose over another 14.8% on the last event held two weeks previously which itself was down over 9.3%.

Key Results

  • AMF index up 26.6%, average price US$2,724/MT.
  • Butter index up 10.8%, average price US$2,541/MT.
  • BMP index down 13.8%, average price US$1,400/MT.
  • Ched index up 4.4%, average price US$2,778/MT.
  • LAC index down 7.8%, average price US$502/MT.
  • RenCas index up 3.0%, average price US$5,441/MT.
  • SMP index up 8.5%, average price US$1,521/MT.
  • WMP index up 19.1%, average price US$1,856/MT.

[caption id="attachment_85244" align="aligncenter" width="400"]GDT GDT[/caption]

Futures markets pointed to GDT rebound

Recent dairy futures prices surged off their lows, according to New Zealand bank ASB’s Rural Economist, Nathan Penny.

He said the price for the November contract for example has this week surged around 30% versus the comparable auction price.

“Markets have begun to bid prices higher on the likelihood that New Zealand production will fall this season compared to last.

“Moreover, with Fonterra reducing by a third the forecast WMP volume on offer at this week’s auction, the price lift may not stop there, he said.

Penny said that on this basis, he expected dairy prices to rise at this week’s GDT auction and said futures pricing this week suggests a rise for whole milk powder of greater than 10%.

Fonterra GDT volume cut

Also this week and another positive for market prices was Fonterra's announcement that it is significantly reducing its GDT offer quantity forecasts for the next 12 months.

Since its inception in 2008 Fonterra has traditionally been the biggest volume seller on the platform and today’s announcement will see the volumes it offers reduce by a third.

In a statement, the world’s largest co-operative has said the forecasted offer volumes over the next 12 months for New Zealand products have been decreased by 56,045 metric tonnes.

A 62,930 metric tonne decrease is forecast over the next three months and 6,885 metric tonnes of planned volumes being added back later in the year in anticipation of changing market conditions.