Dairy prices unexpectedly rise at the latest GloblDairyTrade auction despite increase in supply

Dairy prices stabilised in Tuesday's GloblDairyTrade auction, rising slightly after two consecutive drops. Whole milk powder prices rose 2.9 per cent to US$2,855 a tonne. Analysts had been expecting a decline based on pricing in the futures market.

Overall, dairy prices increased 1.7 percent to US$3101 per metric tonne following a 9 percent fall over the previous two auctions. Prices were down 6.3 percent overall two weeks ago. The result was also stronger than futures markets had anticipated (NZX futures had priced a 6 percent fall). Skim milk powder, however, continued to slide, down 10.1 percent.

“The rise might be attributed to demand from Latin America seeking alternatives to Argentinean products given the floods," Analysts at TDS note in a report.

Overall demand was sufficient to absorb the 10 percent rise in whole milk powder on offer. However, with supply trends in both New Zealand and Europe improving, the market will continue to be challenged by rising supply in coming months.