Dairy prices up a little at latest GlobalDairyTrade auction

Dairy prices rose 1.9% in last night's GlobalDairyTrade auction. Within this headline result there was a 1.8% lift in whole milk powder prices. Although firmer, the increase in prices was smaller than had been signalled by the NZX futures market.  

It was also a fairly soft outturn given Fonterra had announced a reduction in the volumes offered on the GlobalDairyTrade platform this week (including a 2% cut in the forecast supply over the next 12 months). More broadly, Fonterra now expects its milk collections to be down 6% over the 2015/16 season. They had previously been expecting a 5% decline.

Nevertheless, firmer prices in last  night's auction are broadly consistent with the forecast of a $4.50 farm gate milk price this season. However, this forecast relies on further improvement in prices in the new year as dry weather takes a bite out of NZ milk production.