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NZ dairy auction rise surprises

NZ NewswireNZ Newswire 19/04/2016 By Margreet Dietz

Dairy product prices have increased for a second straight auction, posting the third gain in the eight Global Dairy Trade auctions held so far in 2016, as the outlook improves.

The GDT price index rose 3.8 per cent to $US2263 ($NZ3251), up from $US2188 at the previous auction two weeks ago. Some 21,206 tonnes of product was sold, down from 22,682 tonnes.

Whole milk powder climbed 7.5 per cent to $US2156 a tonne.

"The lift in whole milk powder prices on GDT was considerably greater than the market had anticipated," AgriHQ dairy analyst Susan Kilsby said in a note.

Based on NZX Dairy Futures prices, Kilsby said she expects the whole milk powder price will reach $US2450 a tonne by January 2017.

Following the GDT auction, AgriHQ forecasts a small lift in the farmgate milk price for next season. The AgriHQ 2016-17 Farmgate Milk Price currently stands at $4.45 per kilogram milk solids. Fonterra's current forecast is $3.90/kgMS for the 2015-16 season.

"However, if the New Zealand dollar remains strong, then this will erode returns in the 2016-17 season.

"The higher milk price forecast for next season is primarily driven by the expectation that dairy commodity prices will continue to rise in the coming months," Ms Kilsby said.

Danone, the world's No. 1 yoghurt maker, has also said it expects milk prices to rise this year.

In the GDT auction, lactose jumped 8 per cent to $US708 a tonne, while rennet casein rallied 7.5 per cent to $US4742 a tonne.

Butter milk powder rose 2.4 per cent to $US1460 a tonne, while butter gained 2 per cent to $US2746 a tonne.

Cheddar fell 3.9 per cent to $US2636 a tonne.

There were 114 winning bidders out of 163 participating bidders at the 13-round auction.

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